Bulls Go on the Offensive

Tuesday's bounce makes a lot of sense from a technical perspective. But proof of whether it's a "dead cat bounce" or the start of a true rebound won't come until Wednesday, when more fundamental evidence is in hand.

"I think we rally right into the beige book, and then we'll see what this [bounce] is really made of," says Alex Grace, a trader and hedge fund consultant.

There's no question that Tuesday's rally was much stronger than any of the tepid advances since last Tuesday's plunge. After stabilizing trading sessions in Asia and Europe, the Dow Jones Industrial Average surged 1.3% to close at 12,207.59. The S&P 500 jumped 1.6% to close at 1395.41, its largest day gain in four months, and the Nasdaq Composite finished up 1.9% to close at 2385.14 -- its best day since October.

On the NYSE, 80% of stocks were advancing --- the most since July last year, while 78% of Nasdaq stocks were climbing. Meanwhile, upside volume topped 90% in both venues.

All 30 of the Dow's stocks advanced, led by 2% or greater gains in Alcoa(AA Quote), American Express(AXP Quote), Citigroup(C Quote), Disney(DIS Quote), IBM(IBM Quote), J.P. Morgan Chase(JPM Quote) and Altria(MO Quote).

Among the most active on the Nasdaq, large-cap tech companies Apple(AAPL Quote), Intel(INTC Quote), Cisco(CSCO Quote), and Microsoft(MSFT Quote) added over 1% each.

Shares of eBay(EBAY Quote), Oracle(ORCL Quote) and Brocade Communications(BRCD Quote) each jumped more than 3%.

"This is a solid bounce," says Todd Leone, head of listed trading at Cowen & Co. "But it may just be a dead-cat bounce. Much of this is technical."