Now, it's time for the bears' mettle to be tested.

Building on yesterday's late-day rally and shaking off some midmorning weakness, stock proxies took a steadier path to higher levels today. The Dow Jones Industrial Average rose 3.03%, to 8712.02, the S&P 500 gained 3.27%, to 905.46, and the Nasdaq Composite climbed 2.78%, to 1316.52.

"People are surprised the market is up this much for three days in a row," said Bob Basel, director of listed trading at Salomon Smith Barney. "It's almost the opposite action we had a few weeks ago where we melted down in the last few hours every day. Now, we're melting up."

The gains were inspired in large part by financial shares such as Citigroup ( C), J.P. Morgan ( JPM) and Fleet Boston Financial ( FBF), which rallied sharply on news of the International Monetary Fund's $30 billion loan to Brazil, as reported earlier .

The Philadelphia Stock Exchange/KBW Bank Index rose 5.4%, while American Depositary Receipts of many Brazilian firms posted big gains, including Banco Bradesco ( BBD) and Brazil Telecom ( BRP).

Other groups on the rise included defense-industry plays such as Northrop Grumman ( NOC), as well as big pharmaceuticals such as Pfizer ( PFE). Despite a 5.4% drop in Schering-Plough ( SGP) after a federal judge invalidated some patents on its Claritin allergy drug, the Amex Drug Index rallied 3.9%.

In general, losing groups and stocks were in the minority today as advancing issues bested decliners 2 to 1 in NYSE activity, where a solid 1.65 billion shares traded, and by 5 to 3 in over-the-counter trading, where 1.5 billion shares were exchanged.

Strength in drugmakers and biotech -- the Amex Biotech Index rose 5.2% -- stood in stark contrast to weakness in consumer-related names, such as Best Buy ( BBY), which fell 36.5% after slashing its second-quarter earnings guidance. The S&P Retail Index fell 2.1% amid broader worries about the outlook for consumer spending.

Still, despite the "little bombshell out of Best Buy signaling more slowing of the consumer, a lot of other retail stocks were able to shrug it off and end in the plus column," Basel observed.

Wal-Mart ( WMT), for example, ended up 1.4%, to $49.06, vs. an earlier low of $46.50 and despite reporting disappointing same-store sales numbers for July, one of many big retailers to do so.

That kind of resilience, along with the overall market's rally and a conviction more Fed rate cuts will be good for the marketplace, has "people starting to turn toward the positive side," the trader said. "We've still got a ways to go to make a full turn in sentiment but there's a little turn going on."

Indeed, others noted the market's ability to shrug off news that WorldCom's fraud was much larger than originally thought, just as yesterday's news about Tyco's ( TYC) loans to former CEO Dennis Kozlowski had seemingly little broad impact on sentiment. On a separate but related anecdotal note, some of the most steadfast bulls who email me have recently turned skeptical while some previously hard-core bears are now expecting more gains.

Among the latter group is Rick Berry, an independent analyst and technician who has made some excellent calls this year, as regular readers of this column will recall.

Tuesday "was an example of my brashness biting me in the a--," Berry emailed last night. "I thought it was a suckers' rally 'cause it was up an inordinate amount with no apparent explanation. I thought it would fade and we would have a retest of 7500-8000." (As I noted in RealMoney.com's Columnist Conversation that day, Berry had forecast the market would "reverse sharply in the final hour" on Tuesday, and called the advance the "biggest sucker's rally of the year.")

There was a sharp reversal late Tuesday , but not as dramatic as he'd expected. "With yesterday's action forming on the charts a definitive uptrend with 8200 area being a second-higher low from the low on July 24 I have to admit I was wrong and would now say we are in a countertrend rally."

Berry emailed that assessment before today's advance, one which compelled a lot of naysayers to rethink their views, at least for the short-term. During today's rally he forecast, the Dow could move as high as 8800 to 9000 and the S&P to 925 in the coming days/weeks, although, like most true bears, he believes any ensuing rally will ultimately prove fleeting.

As always, time and the tape will determine who wins the great debate between the bulls and bears about whether a big bottom was formed on July 23-24. But, for now, the "yeas" have it.
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.