Tuesday's session demonstrated that corporate credibility issues remain very much in the forefront of market players' consciousness, and can certainly roil individual stocks. But such concerns may be losing the ability to extract big chunks from the market itself, as measured by the major averages.

Still, if we are in the denouement portion of the 'accounting concerns' cycle, it's going to be a long and winding road judging by the last 24 hours.

Shortly after last night's column -- in which I proposed the denouement theory -- was published, Nortel ( NT) announced its CFO was resigning amid revelations of what amounts to insider trading. Then this morning, Nortel issued a quasi-warning about meeting its first-quarter revenue guidance.

Nortel's combination punch ensured the issue of investors' trust and confidence in corporate executives would remain on center stage. Combined with new warnings about possible terrorist attacks, Nortel's news appeared to set the stage for a decidedly negative session.

But after trading as low as 9811.64, the Dow Jones Industrial Average recovered to trade briefly in positive territory before closing off 0.2% at 9863.74. Similarly, the S&P 500 closed off 0.4% to 1107.50 after trading as low as 1102.98, while the Nasdaq Composite finished off 0.7% to 1834.21 vs. its intraday nadir of 1817.13.

How seriously corporate fidelity issues loom for market players depends greatly on their time horizon.

As discussed in today's Midday Musings , market strategist-types -- who are supposed to be big thinkers/long-term forecasters -- are already starting to look beyond the accounting/accountability topic.

"I think it's clearly going to weigh down the market in the first few months of 2002 but looking out toward the latter part of the year, these issues will fade away," said Jeffery Kleintop, chief investment strategist at PNC Advisors in Philadelphia, which has $65 billion under management. "I don't think this is something we'll be greatly concerned with exiting this year."

The fact the Chicago Board Options Exchange Volatility Index -- which dipped 0.3% to 23.47 today -- has remained below 30 suggests investors aren't wildly concerned about accounting irregularities, he said. The focus on accounting is "a fairly regular phenomena at the end of a recession" and history suggests "this is probably going to be a short-lived phenomena," the strategist argued.

Notably, Kleintop is no perma-bull. In a recent report he wrote that "our enthusiasm for the stock market is capped by full valuations already discounting much of our expectations" for a rebound in the economy and corporate earnings.

Kleintop has a year-end target of 1225 for the S&P 500 and a recommended allocation of 65% stocks and 35% bonds for balanced accounts.

Conversely, traders on the front lines of the accounting wars are finding little relief and little ability to look beyond immediate concerns that Tuesday surrounded EMC ( EMC) and Polycom ( PLCM), among others.

Accounting concerns "haven't died down at all; rumors are rampant," said Timothy Heekin, director of equity trading at Thomas Weisel Partners in San Francisco. "Shorts are having a field day."

Heekin was particularly perturbed by the action in Polycom, which fell nearly 7% today. The trader attributed the drop to SECinsight.com, which reportedly said the firm is being investigated by the SEC regarding its acquisition of PictureTel. I could not independently confirm that because the site is subscription only (can you imagine that?).

"They're throwing smoke but there's not a thing wrong," Heekin said. "It's old news and shorts trying to fan flames are really hurting these companies."

Thomas Weisel was co-lead manager of Polycom's Jan. 30, 7 million-share secondary offering and is the most active market maker in the stock, according to Nasdaq. Today's drop to $30.81 left Polycom below the offering price of $31.20.

Morgan Stanley -- the other co-manager on Polycom's offering -- reiterated its outperform recommendation today.

Meanwhile, Mike Driscoll, director of listed trading at Credit Suisse First Boston, noted that Krispy Kreme ( KKD) announced today it would not use off balance sheet financing to pay for a new plant, as previously planned.

"Every company is scrambling to make sure there's no possible accounting issue/irregularity," he said. "People are leery. The concern is still out there."

Driscoll acknowledged that fears of another Enron and systemic risk in U.S. capital markets have dissipated, but "there are still concerns about what all this means and what does it do to the overall market?"

In addition to a shared view of how accounting concerns are weighing on market psychology, Driscoll and Heekin also agreed that things are pretty quiet right now, beyond stock-specific issues.

At 1.1 billion shares, the New York Stock Exchange had its lowest volume day of the year today. At 1.6 billion shares, over-the-counter trading activity also was below recent averages for the second-consecutive day.

But the traders differed on the meaning of the quietude. Heekin echoed the old adage "don't short a dull market," by suggesting "the path of least resistance would be up if not for all these accounting-irregularity issues."

Driscoll, conversely, recommended that "if not shorting outright," selling covered calls is a wise strategy at present.

As for me, I share the view of many observers who believe the VIX's recent declines are something to be concerned about, not take heart in. I feel compelled to write that because several readers have gotten the impression I've become wildly bullish because of this denouement theory about accounting issues. While I'm of the opinion sharp rallies can occur at any juncture, I still believe the market has a lot more forest to traverse before getting out of the woods.
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.