By Bruce Zaro 

Despite the neck-snapping volatility of 2008's early earnings season, the market continues to recover and remains in bull-confirmed territory, making me increasingly comfortable that 1/22/08 did indeed represent the bottom.

Investors are even getting a chance to rub those snapped necks and get the cricks out as the roller coaster takes on some gentler peaks and valleys.  Note that the VIX-the volatility measure, or the fear index as it's called by some-just scored a year-to-date low. Don't get me wrong-there's still plenty of excitement going on, but compared to the standards we've become used to in the last three months, this has been a kiddie ride in recent days.

Two weeks ago, I mentioned the close proximity of a breakout point for the Dow at 12,800, a level we may break through today.. I wanted to show you how, despite the small pullback late last week, that target never fell off the radar screen.

To focus on minutiae, this pullback was the market's startled reaction to the GE earnings report. But, seen through the lens of point and figure analysis, on the chart below you can see that it amounted to the normal backing and filling that occurs in preparation for a breakout; the latest column of O's-a declining market-never exceeded the previous one, hence it never became worth talking about:

With this week's rally, that chart has already reversed up into X's, but I wanted to show it here without that reversal so the pullback could be seen more clearly.

Strong trending assets usually do pull back to the medium point before reversing up into top forward gear again. Thus, what happened after the GE news? No significant damage, that's what.  This action should make investors increasingly bullish.

And should we get through that 12,800 level, as I mentioned in that previous article, it would mark a quadruple top breakout, a very big deal indeed.

Feeling more optimistic about where the market is heading next?  Looks to me that's a reasonable conclusion...