On the Wingtips of Love

In the past, Task might have downplayed the significance of today's gains. But he just got married...
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NEW YORK -- It may surprise some longtime followers of this column to read this, but I'm not going to disparage Tuesday's rally. The

Dow Jones Industrial Average

being up 227.89, or 2.2%, and the

Nasdaq Composite

leaping 254.57, or 7.9%, its second-biggest point gain and (more importantly) biggest-ever percentage rise, is darned impressive.

Sure, the volume wasn't as robust as one would like -- just 842 million shares traded on the Big Board and 1.4 billion in over-the-counter action. But that won't dissuade me from thinking and writing that there was something significant about the session.

"This is powerful," said Sam Ginzburg, senior managing director of equity trading at

Gruntal

. "The volume is too light to make you get crazy, but it's heartening to see

the market can rally back as easily as it got smacked. There is hope out there."

Continued gains Wednesday -- and beyond -- are obviously key and necessary to support the bullish case. Ginzburg acknowledged as much, but is optimistic in part because he expects rallies like Tuesday's will convince short-sellers it's almost not worth betting against stocks.

"Once people start understanding you can't get 'em back so easily on the short side, then you'll start seeing rallies stick," he said.

For example, those short

SDL

(SDLI)

, which rose 11.3% Tuesday, are likely rethinking the wisdom of those positions. Short positions in SDL rose 78% for the month ended May 15, according to

Barron's

.

For the record, my feelings about the market are likely clouded by the fact I recently got married, which -- short of having kids -- is about the most optimistic thing a person can do. (Thanks for all the well-wishes, by the way.)

Thus, I was looking at the world through rose-colored specs even before Tuesday's stellar advance.

Maybe I got too much sun while honeymooning in the Virgin Islands (if you have the means, I highly recommend it), but I started feeling more positive when I encountered such palpable gloom upon my return to the "real" world this morning. I became convinced after reading in

The Wall Street Journal

about the dentist in Texas who's considering (

gasp

) not trading online anymore and on

TheStreet.com

about the

pangs of the ping-pong-player-cum-investor, and others of their ilk.

Finally, I thought, the inability of the market (i.e., "tech stocks") to sustain a bounce is taking a toll on the investing public, which, until very recently, had been so cocksure about its investing prowess. The eradication of such hubris (the deadliest sin, you'll recall) was necessary before the bull market could be reinvigorated.

Beyond that anecdotal evidence, there was also the recent rise in the

Chicago Board Options Exchange

put/call ratio, which spiked as high as 0.81 on May 19 before touching down at 0.61 last Friday. On Tuesday it slid back to 0.37 as optimism -- represented by call buying -- reemerged. But the recent spike in put buying is another indicator of increasing pessimism, which (almost) inevitably proves to be a contradictory indicator. (The lack of optimism expressed in Tuesday's

Roundup is similarly supportive.)

Paul Cherney, market analyst at

S&P MarketScope

, does not believe put buying has yet reached levels high enough to signal extreme pessimism has taken root. But the recent increase in put buying is encouraging, he said, before declaring: "We're within a few days of a low that launches a summer rally."

Cherney was impressed with Tuesday's session, noting market breadth favored advancers by more than 2 to 1 in both

New York Stock Exchange

and over-the-counter trading.

Furthermore, the analyst dismissed the "no volume" argument by noting the

S&P 500

bottomed after the 1987 crash on far less volume than it saw prior to Oct. 19 that year.

"Low volume is a characteristic of a postcrash scenario," he said, suggesting the Nasdaq is in such a period rather than a classic bear market, which is punctuated by low-volume rallies that prove fleeting.

"Low volume doesn't bother me," the analyst continued, noting many momentum players were eliminated during the Nasdaq's swoon and many long-term players are choosing to sit out the action until they're certain the

Fed

is done, or at least on hiatus.

During my cynical bachelor days I most likely would have pooh-poohed such arguments and focused on the lack of volume, or the forthcoming economic data, or the potential negative impact of Wednesday's installment of the

Microsoft

(MSFT) - Get Report

antitrust saga. Or simply the concern it's already too late to get overly aggressive after Tuesday's advance.

But with the Nasdaq still closer to 3000 than 4000 (much less 5000), I'm going to resist that temptation and (as the song goes) accentuate the positive.

Maybe something

has

changed.

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 .