After mainly spinning its wheels for five trading days, the market was back on its (post-Oct. 9) rally course Wednesday. The session had the bears reeling, or at least reconsidering their short-term posture.

The

Dow Jones Industrial Average

rose 1.7% to 8542.13, the

S&P 500

gained 2.5% to 904.27, and the

Nasdaq Composite

climbed 3.7% to 1411.52. All three averages ended at, or just below, intraday highs.

Technically speaking, the Dow's ability to surmount its 20-day moving average at around 8455 and the S&P's eclipse of same, at just below 900, were considered victories for the bulls, as was the Comp's eclipsing 1400 once again.

With those levels -- most notably S&P 900 -- in mind, "several well-known and trading-oriented hedge funds" with long positions in the S&P 500 futures were "attempting to break out the averages through important technical spots,"

RealMoneyPro.com

contributor, Doug Kass, reported at midday. The implication being that if those hedge funds were able -- through legitimate buying -- to push major indices above technically significant levels, more defensively inclined participants would be compelled to cover short positions.

One institutional futures trader, who requested anonymity, saw evidence of "straightforward buying" of S&P futures Thursday, but "nothing unusual or that stands out as any effort to push the S&P to any specific levels."

The 13-day moving average of the S&P is 896 and its 21-day moving average is at 893, he observed, suggesting 900 is "just a round number" and "not significant technically." The key to Thursday, he said, was that after proving unable to rally on positive news events in the past week -- such as the Republican sweep and Iraqi acceptance of the United Nations resolution -- the market did rally following stronger-than-expected retail sales data which, in turn, "caused shorts to capitulate," he said.

Indeed, the futures were solidly higher before trading opened in New York thanks to the government's report that retail sales were flat in October and up 0.7% excluding autos vs. expectations for a 0.2% decline overall and a gain of just 0.3% excluding autos. The report helped the S&P Retail Index rally 2.6%.

Separately, initial jobless claims fell 8,000 to 388,000 for the week ended Nov. 9 vs. expectations for a flat reading. The four-week moving average of claims fell below 400,000 after hitting a five-month high of 425,000 in late September.

In corporate news,

Intel

(INTC) - Get Report

increased its share repurchase plan by 480 million shares, helping chip investors overcome the disappointment of Wednesday night's weak outlook from

Applied Materials

(AMAT) - Get Report

. Intel gained 6%, Applied Materials rose 5.9% and the Philadelphia Stock Exchange Semiconductor Index climbed 7.9%.

Among other big-cap tech favorites,

Dell Computer

(DELL) - Get Report

rose 2.9% ahead of its earnings release. After the close, Dell reported third-quarter earnings of 21 cents per share, in line with expectations.

In other company-specific developments, HSBC's $30-per-share buyout bid for

Household International

(HI) - Get Report

gave a boost to a number of consumer finance names. In addition to Household's 22.4% rise,

American Express

(AXP) - Get Report

gained 5% and was the biggest positive influence on the Dow, while

Providian Financial

(PVN)

rose 11.4%, and

CIT Group

(CIT) - Get Report

and

Capital One Financial

(COF) - Get Report

each rallied over 6%.

Halliburton

(HAL) - Get Report

rose 13.8% thanks to a Morgan Stanley upgrade and rumors of a settlement in its asbestos litigation.

Honeywell

(HON) - Get Report

was a notable laggard on the session and the Dow's biggest restraint, falling 8.3%. Salomon Smith Barney downgraded the industrial giant based on concerns about its rising pension fund liabilities.

But Honeywell was certainly the exception in the Dow, where just three of 30 components ended in arrears. Overall market breadth was less dramatic but still solidly positive as advancing stocks bested declining issues by nearly 3 to 1 in Big Board trading and by better than 2 to 1 in over-the-counter activity. Approximately 1.5 billion shares traded on both exchanges.

As is often the case, demand for shares came at the expense of Treasuries. The benchmark 10-year note fell 1 23/32 to 99 19/32, its yield rising to 4.05%. Meanwhile, the Dollar Index gained 0.23 to 105.33 thanks to the aforementioned economic data and hints from the European Central Bank that it may soon ease. The price of gold fell 0.3% to $318.10 per ounce.

Back on the (Rally) Wagon

Has the market's action got you perplexed? Don't feel badly, you're not alone. Consider Bernie Schaeffer of Schaeffer's Investment Research.

Last night, I reported how on Tuesday Schaeffer abandoned a short-term bullish stance adopted just in late October. Thursday, he was giving that view a second (

third?

) thought:

"At the risk of a 'double whipsaw,' I must report this morning that the short-term market outlook has significantly improved from my perspective," Schaeffer wrote, citing the following:

Thursday's better-than-expected retail sales and jobless claims data.

The market's positive reaction to negative news, notably Osama bin Laden's resurfacing and Applied Material's remarks.

The Dow moving back above its 20-day moving average and exceeding the "key" 8500 level.

Continued weakness in the CBOE Market Volatility Index, which hasn't been able to sustain a move beyond its 20-day moving average of around 35. (On Thursday, the VIX fell 10.1% to 32.60.)

The relative strength of the Comp vs. the S&P. (Since its close on Oct. 9, the Comp is now up nearly 27% while the S&P has gained 16.4%.)

Skeptics might contend the VIX's weakness and the Nasdaq's relative strength are signs of speculation's return and traders' willingness to ignore fundamentals and chase momentum. A more bullish interpretation is that they are signs of market participants' willingness to take risks again, something that was sorely absent in September and early October.

Back in late October Schaeffer postulated a near-term rally could take the S&P as high as 1100. Given his (ongoing) concerns about the top-25 market-cap names, he put the index's upside potential at around 1000 on Thursday. The veteran technician is "most bullish on the technology sector," forecasting the Comp could rally into the 1650-1750 area in the near- to intermediate-term, suggesting some single-digit tech names could gain an additional 50%, despite already posting heady games in many instances.

Schaeffer stressed (again) that "long-term bear market conditions" have not been "disturbed or invalidated by the rally I'm postulating" and that long-term investors should remain out of this market.

But if the market keeps doing what it did Thursday, it's going to be harder and harder for investor types to stay away.

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.