Updated from 3:31 p.m. EDT

Confident, confident, dry and secure. ... Raise your hand, raise your hand, if you're sure.

Raise your hand if you're


the economy is recovering and the fundamentals are as sound as the talking heads would like us to believe. (Today, the White House admitted to "worrisome" signs in the economy, which contrasts sharply to the recent

comments by Treasury Secretary Paul O'Neill.)

Raise your hand if you're


the recent rally wasn't just another false dawn.

Raise your hand if you're


everything is "OK" with the financial system and that there won't be harsh recriminations for firms that helped facilitate


fraud, among others. (Will Glass-Steagall be reinstated?)

Raise your hand if you're


the new regulations designed to prevent future Enrons and


won't unwittingly muck up the gears of capitalism. (An interesting subtext to

last week's conference call was the notion that the financing

J.P. Morgan

(JPM) - Get Report

provided for Enron is "commonly used" by corporations worldwide. If they're outlawed, what affect will that have on corporate financings?)

Raise your hand if you're


the ongoing crises in South America won't have some "contagion" effect.

A lack of certainty about the above (among other issues) weighed on shares early Tuesday, and acutely following the 10 a.m. EDT release of a weaker-than-expected consumer confidence report. The Conference Board's confidence index fell to 97.1 in July from 106.3 in June (revised down from 106.4), even lower than the consensus estimate for a drop to 101.5. (Incredibly, the spinmeisters immediately dismissing the July data, suggesting confidence will rebound in August because of the market's recovery and the various legislation being passed in Washington.)

But after taking a early hit, stock proxies rebounded and finished mixed, with blue-chips down slightly and broader market averages up modestly.


Dow Jones Industrial Average

closed down 0.4% to 8680.03 but well above its earlier low of 8540.12. The

S&P 500

closed up 0.4% to 902.78 vs. an earlier low of 884.70 and the

Nasdaq Composite

rose 0.7% to 1344.19 after trading as low as 1313.49.

Is This a 'Good' Thing?

The market's resilience to negative developments and ability to retain the bulk of recent gains (by the Dow, particularly) encouraged the bulls. But is it really healthy? A number of market participants expect the market to retreat and possibly revisit last week's lows. Furthermore, they believe it would be preferable for the bullish scenario.

"The normal sequence off such a low would be for a 1 1/2-to-two-day rally which should peak on day two, followed by a two-to-five-session pullback that attempts to retest the recent lows," Jeffrey Saut, chief equity strategist at Raymond James, commented yesterday.

Richard Arms of Arms Advisory made a similar forecast on


last week: "All we have so far is a potential selling climax," he wrote. "The second half of the pattern is a lighter volume test of the heavy volume low. In the next few days the market is likely to go back, at least part way, and take another look." (Arms, of course, has been looking for a bottom for some time and has yet to reconcile how the

"double deuce" signal in late April failed to herald a rally until much steeper losses emerged.)

In the nine instances since the 1930s when the S&P 500 has been 20% or more below its 200-day moving average (it was 29% below at last Wednesday's low), the retest proved successful 60% of the time, Saut noted. However, the odds are higher this time he wrote, suggesting "this 'retest' would be successful since the powers that be


it to be successful and would therefore


it successful."

Saut didn't clarify what he meant by that in his report. But you can draw your own conclusions amid the market's recent meltdown and the ongoing congressional inquires into the role of J.P. Morgan,


(C) - Get Report

and (today)

Merrill Lynch


in the Enron fiasco (among others).

In a follow-up call today, the strategist stressed he's "not a conspiracy theorist," but noted O'Neill "went to New York and talked up stocks." He also cited reports of Dutch pension funds ABP and PGGM deciding to stop lending their shares to short-sellers, and suggested central banks "obviously manipulated the dollar," which today was rescinding some of its recent gains. The Dollar Index dipped 0.24 to 107.15 today.

"The scene was set for some kind of throwback rally," Saut said, admitting that he's been "looking for a trading rally for weeks."

The Big Thing

As to whether or not last week was


low, the strategist is skeptical, noting "every major low in the last 70 years" has been earmarked by 9-to-1 downside breadth and/or volume days or a series of such sessions, which didn't materialize in the recent swoon. (Today, up volume was 60% of the 1.8 billion total on the Big Board, where breadth favored advancers 17 to 14.)

"I'm hopeful it's


low but I'm from Missouri

and you're going to have to prove it to me," he said.

That said, the strategist does believe a tradeable emerged late week. After a "shallow pullback" in the coming days, he forecast stocks will likely remain in an upward trend into mid-August. But "the mistake is not staying cautious too long but turning into a 'new bull market call' too soon," he stressed.

I couldn't agree more and, for what it's worth, that's precisely the point I was trying to make

last night. Although it was apparently lost on many readers I did write (again): "If the market were really going to toy with people's emotions (as it is wont to do), what will happen is

Wednesday's rally will be built upon for a measurable degree of time and price

, defying the naysayers."

Translation: Stocks could certainly build on the recent, sharp rally. Furthermore, such a move seems likely, given the amount of skepticism among investors, the extreme price moves in the bond market and the June outflows from mutual funds.

But, "the big thing is the unwinding of the bubble," as Robert Shiller, Yale economics professor and author of "Irrational Exuberance", said on


earlier today.

Because the unwinding of the bubble is the "fundamental driver" of what's happening now, Shiller is "not enthusiastic about prospects for the next five years or more."

Again, I couldn't agree more. The unwinding of the bubble is why I'm not convinced now is a 'great buying opportunity' for

long-term investors

, as many contend. What's a little frightening is that a lot of people still don't/can't see this and refuse to acknowledge what a

post-bubble market can be like.

As Saut quipped, "It's amazing how we can all eat from the same plate and disagree on what's been served for dinner."

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 invites you to send your feedback to

Aaron L. Task.