There may be a little more life in the recent rally, but if investors and traders are looking for a major market bottom and a new bull market, they're probably going to be disappointed.

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Short term, yes, this latest rally could continue to provide -- and has already provided -- a nice trading opportunity. But eyeing some of the

options market's indicators of sentiment, such as the

Chicago Board Options Exchange Volatility Index

, or VIX, and the

American Stock Exchange

volatility index based on

Nasdaq 100 unit trust

(QQQ) - Get Report

options, or QQV, they're not screaming major market bottom.

"It just doesn't seem like we have those fear levels," says Al Schwartz, equity options trader and analyst at

Schaeffer's Investment Research

, which mark major bottoms.

What qualifies as fear when looking at the VIX? In October 1997, the index soared as high as 55.48, and in October 1998, it rocketed up to 60.63.

The aforementioned gauges are used mainly as contrary indicators, meaning that extreme readings, either high or low, can signal that a cycle in the market has just about exhausted itself and is poised to reverse. For a more detailed look at contrarian theory, check out this recent

Options Forum on the subject.

The VIX, commonly known as the market's fear gauge, is based on the prices for options on the

S&P 100

, or OEX. The VIX rises when

put-option buying on the OEX increases. Investors buy puts to protect long positions in a stock or index, or to speculate on further downside for a particular stock or index. To the contrarian, the higher the reading on the VIX the better, because most of the time the VIX is shooting higher when the market is selling off and investors are willing to pay more for OEX put options. Some market analysts discount the accuracy of the VIX, it should be noted, because volume in OEX options has dried up significantly in recent years.

While the VIX has perked up lately, it's not exactly at big levels of fear compared to where it has risen in the recent past. The VIX has surged and shown whiffs of notable fear, but rallies from those levels have ultimately failed. For example, on Dec. 20, the VIX spiked up to 37.72; from there, the OEX managed a decent short-term rally, but as of yesterday's close, from the close on Dec. 20, the OEX is down 3.5%. From Dec. 21 to yesterday's close, the OEX is off 4.5%.

The situation with the QQQ's performance over that time is even worse. The QQV closed at 75.40 on Dec. 20; the highest closing reading it has seen in its relatively brief history. From the close on Dec. 20 to last night's close, the QQQ is down 14.7%. After Dec. 20 it managed a little rally, but not huge. On Jan. 8, the QQV closed at 72.75, which looking back helped signal a decent rally in January for the underlying QQQ. Of course, a trader would have needed to get out at the end of the month because since then, the QQQ has gone on to make new 52-week lows.

(As with the VIX and the OEX, overall, the QQQ and the QQV have had an inverse relationship. So generally, when the QQQ is down notably, the QQV will be up. The QQV is calculated by measuring the implied volatilities (a key component of an option's price and the market's estimate of how much the underlying security can move) of certain QQQ options. QQQ options were the second-most active option traded among the nation's five options exchanges in 2000.)

Another widely followed indicator of investor sentiment and a contrarian indicator is the equity

put/call ratio. Analysts like to use a 21-day moving average for the ratio because that smoothes out the data and thus excludes one-day aberrations, for example, which could give off false buy or sell signals. Right now, the 21-day equity put/call ratio isn't giving off a buy signal. For a buy signal to come in, the moving average would have to peak and turn down.

Options guru Larry McMillan of

McMillan Analysis

, who uses the 21-day moving average equity put/call ratio, said it's not giving off a buy signal right now, although he adds that, "It could happen at any time."

But investors would be cautioned to note that a buy signal doesn't mean a return to the giddy days of the bull market. It looks like it would be a nice short-term condition and not a precursor to the supercharged stock market of the 1990s.