Two straight quarters of rising stock prices mark an end to a stock market recession. The overhanging economic recession is also reaching its end. There are plenty of storm clouds still scudding around but the stock market and the economy are both in established uptrends.

This quarter’s advance of over 15% was the best for stocks in more than ten years. The year-to-date return is still only 2% higher as stocks made little ground in the first two quarters this year. With much of the global economy on the road to recovery, stocks have room for further gains as they enter the historically strong fourth quarter and a possible year-end rally.

Such a rally, if it happens, will have to conquer the persisting anxieties that keep many investors clinging to bonds and money market funds despite their extremely low yields. These low rates are helping the Treasury as well as the companies that are returning to the bond market. Lower interest rates have almost always been a reliable signal to investors that higher stock prices lie over the horizon.

The higher a perch an observer takes, the longer the distance to the horizon. Choppy waves may block a low range view and it is quite possible that the market may slop around for a while to digest its recent gains but the longer-range view is clearing. Stimulus funds are beginning to spill into some sectors like construction even though the consumer is tapped out and the retail sector is listless.

While the Great Recession is fading, its effects are lingering as shown by a glance at the jobless rate. On present trends, this will not start going down until the spring. There are some recent signs of these trends improving and the reaction to the recent abrupt slump might well be a surprisingly strong economic recovery over the next few weeks, possibly followed by a tapering off next year with the easing of financial stimuli.

With this mixed but improving playing field, stock investors who concentrate on well financed companies with solid earnings growth prospects will continue to do well. Stocks will fluctuate, as always, as public moods vary between greed and fear.

Stock variations are thus often more psychological than logical. I recently recommended Crucell (CRXL-$23), a growing global Danish-based biopharmaceutical developer of flu vaccines. Not only does it focus on a currently “hot” topic, but also has excellent earnings growth, solid finances, sufficient size with $455 million sales to ride out adverse winds and a recent contract award from the U.S, government.

Johnson & Johnson, the big healthcare company, ratified my judgment by announcing last weekend that it was buying an 18% state in Crucell for $440 million. It said that it intended to work with Crucell toward developing a universal flu vaccine. Despite this favorable development, Crucell opened off almost two points lower on impatient selling by the bow tie boys, annoyed that J&J had not bought the whole company.

A good buy before this announcement, it became a better one with this validation of its research capabilities. This illustrates as Oliver Wendell Holmes said about the law, that the path of the stock market is not logic but experience. It is also another example of the wave of mergers in the undervalued healthcare sector.

Schering-Plough (SGP-$28) is now only a few weeks away from its merger with Merck (MRK-$32). The merger arbitrage spread has closed to just under 3%, still attractive for this time period. Shareholders will receive $10.50 in cash plus .58 shares of Merck. With Merck’s dividend yield almost 5%, buying SGP is still attractive.

Investors will need improved quarterly earnings reports to bolster their confidence. These will start coming in a few weeks. Despite the many reasons for concern, the present uptrends seem likely to take the Dow through 10,000 this year.