Volatility Is the Only Constant

The only sure thing in the stock market Wednesday was volatility.

The CBOE Market Volatility Index, or VIX, spiked to a four-year high intraday Wednesday at 26.21, and the S&P 500 briefly traded below its 200-day moving average of 1449.79.

But the so-called fear index fell from its highs to end up 1% at 23.75. Major averages rebounded from steep intraday losses, as the bulls resumed their "buy-the-dip" mentality, particularly in the last hour of trading.

The S&P 500 bounced against its 200-day moving average, and ended the day up 0.75% to close at 1465.81. The Dow Jones Industrial Average closed up 150 points after being down as much as 79 intraday, finishing up 1.15% at 13,362.37. The Nasdaq Composite closed up 0.3% at 2553.87.

The early weakness followed news of troubles at another Bear Stearns(BSC Quote) hedge fund that's suffered from bets in the mortgage market; there were also reports of margin calls from prime brokers causing some liquidation selling at other funds, including Caxton Associates.

The credit market jitters prompted some to wonder how many Citadel Investment Groups are really out there able to come to the rescue and buy up much of this stressed, if not distressed, debt.

All the angst over the financials and mortgage markets was reflected in Market Vane's bullish consensus, which reached 54% for the week ended July 31, its second-lowest reading since 2003.