SAN FRANCISCO -- Confounding the pundits -- as they are wont to do -- investors did not run to the hills after last week's huge declines. Instead, they stood their ground and ultimately mounted an impressive counteroffensive, sending major averages soaring

Monday.

The

Nasdaq Composite

leapt nearly 218 points, or 6.6% -- its biggest point gain and, more importantly, second-biggest percentage rise ever. Meanwhile, the

Dow

climbed 277, or 2.7%, and the

S&P 500

rose nearly 45, or 3.3%.

The action had some market players cautiously talking about the market -- nee, the Comp -- having finally established the much groped-for, but so far elusive, bottom.

"The market showed it still has a pulse and could rebound from the nervous Nellie selling," said Doug Myers, vice president of equity trading at

IJL Wachovia

in Atlanta. "These levels of volatility, which scare people like me that have been in the business, do not scare the man in the street. The general investor took this in stride."

Myers agreed a "too fast, too soon"-type rally would not bode well for the market. But he said investor complacency does not mean Monday's action will prove to be as false as the nose on

Tori Spelling's face.

"The price action now doesn't fit any textbook theory, so try to ride the wave," the trader said. "You shoulda' bought 'em late Friday."

Besides the absence of the kind of fear and loathing traditionally found at important bottoms, market skeptics (should I say "purists"?) point out the Nasdaq is missing something else of note -- strength. Relative strength, that is.

Bottom Out or Bottom Up?
Nasdaq Comp. vs. relative strength

It may seem self-evident that the Comp's relative strength has declined as its price plummeted, as the accompanying charts indicate. But the two measurements do not always move in synch -- which is why traders bother to pay attention. Often when a stock -- or index -- is heading lower, its relative strength index (a measure of its internal strength vs. a comparison to another gauge) will be rising, providing a technical indicator that a true bottom is in place.

When the Nasdaq had a big intraday swoon and reversal on

April 4 , many hoped the index had established a near-term bottom. But those who follow such technical indicators were convinced otherwise, largely because its relative strength index (RSI) had been in steady decline.

The RSI stood at 34.6 on April 4, vs. just more than 60 on March 24, and 74.34 when the Comp set its all-time closing high on March 10. Back on Jan. 3, when the index began what was then a "scary" correction (but now seems more like a

friendly ghost), its RSI was at 98.63.

On

Friday, the relative strength index was down to 24.4, which "would suggest it's not a bottom for the Nasdaq," said John Bollinger, president of

Equity Trader.com

. "Normally, you would get a selloff to a new low

in price and the relative strength index would not go to a new low."

Reflecting on the price action, Bollinger said Friday's low of around 3266 is now the key near-term support level for the index and one that is likely to be retested in the coming weeks, if not days.

For the retest to pass -- vs. the abject failure of the retest of the April 4 low -- Bollinger said you would expect the relative strength index to be on the rise.

The Comp's 14-day RSI climbed back above 32 Monday, which, at least, is a step in the right direction (for those long).

But the action was "a gift from the gods and another opportunity to sell," according to Ronny Kraft, CEO of

Gotham Capital Management

, who noted market breadth was "anemic" despite the advance by major averages. Indeed, losers led gainers by ratios of 17 to 13 on the Big Board and 26 to 17 in over-the-counter trading.

"They knew which stocks to gun," he said, citing

Intel

(INTC) - Get Report

as a prime example, because of its "double-dip" impact. (It's both a Nasdaq bellwether and Dow component, that is.)

The hedge fund manager -- and, yes, he's the same one who so boldly and wrongly called for a

crash back in September -- has been actively shorting the market in the past month, focusing on targets such as the

Nasdaq 100 Trust

(QQQ) - Get Report

vs. individual stocks.

Short-covering seemed to be a factor in Monday's gains but "I was not among them," Kraft said, admitting he did not add to the short position either.

"I'm trying to trade signals, not noise," he said, dubbing Monday's session a function of the latter vs. the former.

As far as important signals, the Nasdaq would have to rise above 3800 for him to reverse and go long. Barring that, the hedger foresees the index falling minimally to as low as 2800 in the near term.

"There will be some seminal event that says we're at a bottom," he said. "There's no sign of it."

I know reading that Kraft is short again has many of you gleeful, even giddy (if not downright incredulous). If you're convinced he's the great contrarian indicator, go ahead and use your energy to bet against him.

All indications suggest you're going to need every bit of it.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

taskmaster@thestreet.com .