If nothing else, equity markets continue to display a proclivity for high drama. Stock proxies started this week looking like lambs about to be sent to slaughter, but went out looking like lions after robust gains Thursday and Friday.

Snapping a string of weekly declines at six, the

Dow Jones Industrial Average

rose 4.5% for the week, while the

S&P 500

gained 4.9% and the

Nasdaq Composite

rose 6.7%.

Early on, stock proxies appeared headed to a seventh-straight losing week, if not something far worse for those who are long.

The S&P 500 fell below 800 for the first time since April 1997 on Monday while the Dow and Comp established another round of multiyear lows. Shares rebounded Tuesday on word President Bush would intervene in the lockout of West Coast longshoremen. But those gains were eradicated Wednesday, amid a slew of

earnings concerns over bellwether companies such as

General Electric

(GE) - Get Report

,

Ford

(F) - Get Report

and a Moody's downgrade of

J.P. Morgan

(JPM) - Get Report

.

Wednesday's losses left the Dow at its lowest level since October 1997 and the Comp at its worst since August 1996. The extent of the declines -- particularly the 7-to-1 negative breadth on the

New York Stock Exchange

-- had some technicians convinced an oversold bounce, at least, was in the offing.

But shares tumbled again early Thursday, with the S&P 500 trading well below its July 24 intraday low of 775 at around 10 a.m. EDT. More analyst downgrades of GE. and disappointing same-store sales data from retailers such as

Kohl's

(KSS) - Get Report

kept the downward pressure on shares.

From Thursday morning's low, however, the market took a sudden and violent turn in the other direction, with major averages posting stunning gains to end the week.

A reversal rally Thursday was aided by better-than-expected earnings or forecasts from

Yahoo!

(YHOO)

,

Aetna

(AET)

and

Idec Pharmaceuticals

(IDPH)

. Also aiding the advance: A sharp drop in weekly unemployment claims and better-than-expected August wholesale sales data, which left the inventory-to-sales ratio at its lowest level on record.

As

detailed here, several observers also spotted a slew of technical indicators that hinted at Thursday's rally and suggested more to come. As it turned out, the Dow's gains for Thursday and Friday combined for the largest two-day advance since March 2000.

Friday's rise of 4.2% for the Dow, 3.9% for the S&P 500 and 4% for the Comp, which were attributed to a Lehman Brothers upgrade of

IBM

(IBM) - Get Report

and relief that GE's third-quarter results weren't worse, seemed to justify those forecasts.

That Friday's advance occurred despite another drop in consumer sentiment, a slightly weaker-than-expected retail sales report for September, and ongoing worries about geopolitical developments, the economy and valuations lent further credence to the notion technical factors were holding sway.

Full Steam ... Which Way?

Of course, the overriding question heading into the weekend was whether the gains will continue, or prove to be yet another false dawn.

"Though I emphatically feel as if it would be imprudent for me to call the end of the bear market, I do feel as if there is more potential strength to the up move," Rick Bensignor, chief technical analyst at Morgan Stanley, commented Friday.

Bensignor, who made a bullish technical call Thursday morning, forecast more short-covering by speculators could help push the S&P 500 into the 830-to-860 range in the near term. For the balance of the year, he foresees a scenario in which the index falls back and holds support at around 800, then rallies again and exceeds 900, perhaps revisiting the August peak of 965.

"Few believe in this rally. More reason for me to think we've got a good chunk further to go," he wrote.

As always, the state of sentiment, a contrarian indicator, remains hotly contested. Skeptics note the eagerness of traders to leap into shares at week's end, and the action in the CBOE Market Volatility Index this week prove that optimism reigns.

The VIX didn't exceed its summer highs this week even as major averages hit new lows, and ended Friday at 43.44, down 6.1% for the week. Additionally, the bond market's losses during a week when

(PMRAX) - Get Report

Pimco's Total Return fund became the largest mutual fund by assets was noted. For the week, the price of the benchmark 10-year Treasury note fell more than 1 point, its yield rising 12 basis points.

Optimists, meanwhile, argued that a drop in bullish sentiment in the

Investors Intelligence

poll Wednesday, as well as an only-modest rise in the Daily Sentiment Index after Thursday's rally, showed negativity prevails. In addition, contrarians were delighted by lowered price targets from Goldman Sachs' ever-bullish strategist Abby Joseph Cohen and a slew of downgrades by sell-side analysts this week.

"With Morgan Stanley and Merrill Lynch downgrading

GE down here, we don't see much reason to not be in that sock at a 14 P/E," said Jon Najarian, president of Mercury Trading, one of the largest market makers at the Chicago Board Options Exchange.

Late this week, Najarian was buying both common stock and/or bullish options of GE, J.P. Morgan,

Citigroup

(C) - Get Report

,

Disney

(DIS) - Get Report

,

American Eagle Outfitters

(AEOS)

and other "fallen angels."

Clients of a brokerage firm he's associated with, PTI Securities & Futures, were doing the same, he noted, and for more than just short-term trades.

"It's different with J.P. Morgan and Citigroup but, warts and all, we'll be happy in six months" after buying at recent price levels and P/E ratios, he said.

Morgan Stanley described GE as being hit by a "perfect storm" but "I don't think it's going to be hitting," Najarian said. "Obviously, because the market is going up, the hurricane is dissipating just like Lily did."

Still, whether the bearish storm has truly passed or what transpired last this week was merely the eye of the hurricane remains very much an open question.

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.