You gotta make hay when the sun shines, and it was shining on like a crazy diamond this week for those long equities.

Fueled by three consecutive days of stellar gains midweek, the Dow Jones Industrial Average jumped 5.2% for the week, while the S&P 500 gained 5.1% and the Nasdaq Composite rose 4.7%.

It's hard to say for certain what, or who, put the bop in the market's bop-she-bop this week. Much of the ram in the market's ram-a-lam-a-ding-dong was attributed to speculation the Federal Reserve would ease at its policy meeting on Aug. 13. However, such expectations had cooled by week's end, thanks in no small part to the stock market's rally. As discussed earlier , rumors of a potential Fed easing helped stock proxies, which had the perverse effect of making the need for a Fed ease seem less urgent. (Funny how that works, isn't it?)

Another factor in the market doing the (previously) forbidden dance to higher levels was the midweek confirmation of a $30 billion loan package for Brazil from the International Monetary Fund. The loan temporarily stabilized financial markets in Brazil, averting a potential meltdown in Latin America's largest economy. Perhaps even more importantly, the IMF action provided a salve to money center banks with big Latin America exposures, including Citigroup ( C), J.P. Morgan ( JPM) and Fleet Boston Financial ( FBF).

Among other notable news this week were earnings from Cisco ( CSCO), which were officially "good" but considered "bad" by some and indifferent by many. Notably, Cisco's earnings Tuesday evening had seemingly little carry-over effect on Wednesday, which enjoyed a robust late-session rally attributed to a variety of other factors.

Similarly, Intel's ( INTC) controversial stance on options accounting seemed to have little impact on broader trends, same with revelations that the scandals at WorldCom and Tyco ( TYC) were even worse than previously imagined, or more controversy involving Merrill Lynch's ( MER) dealings with Enron.

Similarly, stocks seemed to look past the week's economic data, which were mixed. Contrasting Friday's surprisingly strong productivity data and Thursday's lower-than-expected jobless claims were a bigger-than-expected rise in consumer credit on Wednesday, some punk same-store sales numbers (and accompanying implosion at Best Buy ( BBY), and a weaker-than-expected ISM Services Index survey on Monday.

Thursday's PPI report for July summed up the week's data, as it was weaker-than-expected, which is ostensibly good, but so weak (down 0.2% overall and 0.3% in the core) that it renewed deflation fears in some circles.

The aforementioned notwithstanding, it did seem the stock market was dancing to the beat of its own drummer this week (it's a hot summer Friday in San Francisco, forgive the musical interludes.) Many optimistic observers contend that the market had already "priced in" the recent concerns about the economy, and that in the absence of new corporate scandals or international upheaval, stocks should remain ascendant.

Technically inclined bulls believed Monday's significant losses -- which left the Comp at its lowest closing level since the spring of 1997, i.e. below its July 23 closing low -- marked a successful "retest" of the late July lows. At Monday's nadir, the S&P and Comp each had retraced more than 90% of the gains generated from the lows of July 23-24 to the highs on July 30-31, while the Dow had retraced 59.5% of its rally.

"That looked, to me, like a perfect low-volume test of a high-volume bottom and suggested the turn was legitimate," commented Richard Arms of Arms Advisory Service and also a RealMoneyPro.com contributor. "This continues to look like a time to be accumulating stocks, not just for a rally but for a move lasting weeks or months."

Arms forecast such a low-volume test in the wake of the market's reversal on July 24. But he was also proven wrong in a previous attempt to call a bottom.

Bears 'Stop, Say What's that Sound?'

Skeptics counter that there's no fundamental rationale for higher prices and that technically, major averages only succeeded in moving back toward resistance levels, which they now must surmount. Still, this week's action sparked some reassessment by previously bearish observers .

Mark Dow, who co-manages the $300 million ( MEDIX) MFS Emerging Market Debt fund, observed that while Brazil's rally "fizzled" -- with the most liquid Brazilian Brady bonds falling below pre-IMF-package levels late in the week -- the Philadelphia Stock Exchange/KBW Bank Index rose another 0.7% on Friday, amid an otherwise mixed and mercifully quiet session. The Bank Index finished the week up 8%.

"It smells to me like a market that wants to extend the rally," Dow said, stressing that his fundamental view of the U.S. market/economy is not a bullish one.

Separately, Kevin Depew, a technical analyst at Dorsey Wright & Associates, noted the NYSE bullish percentage indicator "reversed up Friday , indicating the offense is on the field for NYSE stocks." Groups that already have reversed up to the offensive include (nonair) transports, health care, leisure, gaming, drugs and biomed.

The NYSE bullish percentage indicator was created by A.W. Cohen in 1955 and is calculated by dividing the number of NYSE stocks trading on new point-and-figure buy signals by the total listed on the exchange. Point-and-figure charts are pure price charts that plot supply and demand for a given stock or index, without factoring in time or volume.

Earlier in the week, Depew noted the NYSE bullish percentage was improving but still on the defensive. More importantly, he reported the risk was "high for all stocks" back on June 4 when, in retrospect, it surely was.

For the record, the analyst noted the equivalent bullish percentage indicator for Nasdaq stocks "remains on defense and is more than 4% away from a reversal."

But you've got to start somewhere and this week was a pretty good start for those singing the bullish tune. Whether they can hold the high notes remains, of course, to be determined.
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.

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