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And a proprietary indicator he watches shows a real dearth of leadership on the down side. That usually means good stock market gains in the months ahead, he said.

But you’d be hard pressed to find investors who are licking their chops at that. In fact, says Stack, many retail investors are out of the market or traumatized.

A recent survey by Charles Schwab & Co. found that only a third of investors polled were confident in their ability to make investment decisions. Blame two bear markets over the past 12 years plus 2010’s “flash crash” and the series of crises investors have lived through for that disillusionment.

But “2011 was no more volatile than 2010 and was actually much less volatile than the past two years,” he told me. “Volatility has been in investors’ emotions. What we’ve seen have been extremes of fear.”

Fear of the unknown is most pervasive, especially about Europe, a possible confrontation between Israel and Iran, and the continuing debt crisis in the US.

“We don’t know what’s going to happen with Greece, we don’t know what will happen with Italy,” Stack told me. “We’ve been worried about banking crises in Europe for the last two to three years.”

Brandishing his statistics again, he said US markets have continued to advance during eight of the 13 recessions in Europe over the last 50 years.

And what about a possible attack by Israel against Iran to keep the Islamic Republic from developing nuclear weapons? That would be a problem, he said, especially if Iran tried to close the Strait of Hormuz in retaliation.

It could drive crude prices to $150 a barrel and be “a considerable headwind, because it is pulling discretionary spending out of the consumer’s pocket,” he said. But, he added, “geopolitical events generally do not have a lasting impact on the US economy.”

He thinks Saudi Arabia and other producing countries “will be opening up their spigots because they know the repercussions—the world going into a global recession.”

But there’s a silver lining: In Stack’s view, all that fear has helped keep valuations attractive. The S&P changes hands at about 14x trailing-12-month operating earnings and 15x reported earnings. Since 1960, stocks have traded at over 20x earnings when long-term rates have been less than 3%, he said. By that metric, “one can reasonably argue that the market is undervalued by 10%-30%.”

Stack doesn’t use target prices, but says “we could easily see a double-digit gain in 2012.” That’s pretty typical for presidential election years when incumbents are running for re-election—another reason he’s still bullish. 

Read Howard’s analysis of why the election could make 2012 a good year for stocks on MoneyShow.com.

How long will the bull last? Stack won’t name a date, either, but said this bull market is “maturing,” not mature. That means we could be at least a year away from its finale. Since 1932, bull markets have lasted roughly three-and-a-half years, on average, and in two weeks, we’ll celebrate this one’s third birthday.

Stack likes sectors like industrials and materials, which do well midway through a bull market. He particularly likes energy stocks as hedges against a spike in oil prices under a new Persian Gulf crisis.

His favorites: domestic exploration and production companies like Marathon Oil (MRO), ConocoPhillips (COP) and Occidental Petroleum (OXY), whose supply won’t be disrupted by events in the Gulf, he says. For ETF investors, he likes the Energy Select Sector SPDR (XLE)

These all have rallied along with the market and energy prices.

I think this market has made a huge move based largely on anticipation of a deal with Greece. Now, it may sell off a bit, perhaps into the mid-1200s. The Iran situation is a huge wild card that nobody can predict.

But given Stack’s track record, I wouldn’t bet against him for the long run. So, I might use any correction to buy a little more stock or at least hold on for the rest of a bull market that he says ain’t over yet.

Howard R. Gold is editor at large for MoneyShow.com and a columnist for MarketWatch. Follow him on Twitter @howardrgold.