By Bruce Zaro 

What should we make of Tuesday's 416 advance on the Dow? Did this change the landscape or was it just another short-lived bounce?

Testing - It still feels to me like January 22^nd was the towel-throwing session. The internal statistics suggested a classic panic-driven, selling climax. Markets, however, tend to want to test investors' resolve, probing to see if they'll sell at lower prices. Late February and early March saw minor assaults on that January Dow low at 11,650. Monday's low was 11,691, so far holding above the ring of towels. Tuesday news of the Fed action brought a strong bounce along with volatility but it has yet to break out meaningfully; such a breakout, however, would take place at just 12,300 thanks to the backing-and-filling in recent weeks.

Building - Since 1987, there have been numerous single days the market has rallied by 3.5%, as it did yesterday-30 of them, in fact. Of those, 23 took place with the market on the oversold side of the ledger. The market's state borders not just on oversold, but on dramatically oversold, so there is good reason to think yesterday's big move suggests more upside to come.

And don't let today's volatility scare you unnecessarily.  Increased volatility often foreshadows a change in trend, not just a top. Indeed, when I look at the important market bottoms of 1982, 1987 and 2002, it strengthens my conviction that the bottoming process is coming to a close

Take the period immediately following the Crash of 1987. Volatility increased dramatically with 3 of the biggest percentage gains in history taking place within 10 days of the October 19^th crash. The 21^st (up 9.1% - 258 pts), the 20^th %.33% - 233 pts) and the 29^th (4.33% - 244 pts) are all in the top ten of Dow percentage gainers. How about 2002? Volatility indeed increased around the time prior to and after the widely recognized October 11^th bottom.

I am increasingly confident that the market is about to start looking though the windshield rather than the rearview mirror. Case in point: today's reaction of the Carlyle default saw the market experience a 350 point positive swing. If this had occurred 4 weeks ago my guess is we would have had a 500-point meltdown, instead. Stay calm...we are close to moving off the bottom for good.