By Bruce Zaro 

Even if we're all a little punch drunk from the market's '08 directional changes, a close look at the tea leaves now shows a pattern of recovery. I see the market strengthening and its bounce from the bottom accelerating.

All three major indices have broken into positive trends and that's cause for a cautious hoorah. But, meaning no disrespect to the revered Dow Industrial and other widely followed indices, the real blood-and-guts action takes place in the broad market. That's why, at times like these, readers know I look to the somewhat archaic New York Stock Exchange Bullish Percent Index (from the world of Point and Figure analysis) to tell me what the average stock is getting up to.

As I write this, the NYSE Bullish Percent is moving into bull confirmed territory, at 42 percent, that exceeds the previous top reached in February and I feel inclined to add another chip to the pile that's betting the market bottomed out on 1/22/08.

So, despite all of today's frightening headlines, it seems more and more stocks are actually returning to healthy chart conditions and gaining strength, as are the three major indices. Looking at Dow chart patterns, we see the bull sharpening its horns over the last month and poising for a major breakout at 12,800:

DJIA 1-year chart:

This break would take out three previous tops in January and February, and we're waiting, pencils in hand, to record it. On the Point & Figure chart below, it is perhaps even easier to see:

DJIA 50-point P&F chart:

Just how important would such a break out be? Well, consider: with a Dow breakout above 12,800 would come a price objective between 13,800 and 14,000- within a finger's reach of the all-time high.