Just how optimistic are penny stock traders? Is there a bull snorting at the door...or could a weak fourth quarter usher in a lumbering bear?

You might want to hold off clicking the heels of your ruby slippers (or Italian loafers) three times.

If you ask me...it's a confusing time for trend chasing, news hound investors. Sure things look rosy...but are they?

Stock market volatility (a measure of market jitters) is near all-time lows. Stocks themselves, as measured by the Dow in New York, are at an all-time high.

In fact, the Dow advanced for a fourth straight session Thursday, climbing 28.98 points to close at 12,163.66. The Dow also reached a new trading high Thursday of 12,167.02.

Shares of big companies continue to win over conservative, staid investors looking for some stability as the economy's growth moderates.

"There's mixed economic data out there that's not telling you one thing or another, its not telling you to take the markets higher or lower," noted one analyst.

And perhaps he's correct. If you look at the charts; penny stocks are clearly in an uptrend. (This is the stock market though...that trend could end at any unannounced moment.) Oil and gold look as though they could do just about anything.

The strong earnings growth being reported by companies for the third quarter is encouraging, said one analyst. But he cautions penny stock investors about getting overly excited about the Dow's gains. "Stocks have been doing very well, but all the issues haven't gone away," he said. "Keep your head screwed on straight."

Put everything together and what have you got? I'm not sure. Despite the growing optimism and Dow records, a real long-term trend has yet to reveal itself. Should that concern the seasoned penny stock investor? No. Penny stocks tend to ignore trends.

Still, optimism in first class can trickle down to those of us at the back of the bus. So I certainly wouldn't discount the influence of over arching optimism.

To add to the optimism, the Feds decided Wednesday not to raise interest rates, noting the economy was growing at a moderate rate. It was the third straight meeting with no change in policy. This follows rate hikes at an unprecedented 17 consecutive policy-setting meetings that brought overnight rates from a decades-low of 1% to 5.25%

The Feds, it seems, are waiting on the sidelines to see whether the slowdown in the housing and auto sectors in the third quarter spills into other sectors in the coming months, or, whether the economy rebounds.

Does that mean you should join them on the sidelines? I don't think so. Whether the market is up or down, whether blue chip investors are bearish or bullish, the markets always move in cycles.

When times are slow...it's a fantastic time to pick up great penny stocks on the cheap. When the market picks up, it's a great time to sell. Missed out on some other sleeping giants? It's also an opportune time to buy high and sell higher.

For the moment though, Fed officials expect the economy to experience a soft landing, with moderated growth. After all, if there's one thing we want, it's a soft landing. The last thing we want is to cause the Baccarat crystal in first-class to chip.