With the market levitating again Monday, the inevitable question popped up of whether the bubble is reinflating. The answer depends very much on one's perspective.

Earlier, we examined the state of sentiment and showed how high levels of bullishness aren't always a great contrarian indicator or market-timing tool. Monday's action evinced as much with the Dow Jones Industrial Average rallying 2.2% to 9318.96, its highest close since July 5, 2002. The S&P 500 gained 2.2% to 1010.74, its first close above 1000 since June 20, 2002, while the Nasdaq Composite rose 2.5% to 1666.58, its best finish since May 23, 2002.

Notably, the June 6 intraday highs of 9216 for the Dow and 1007.63 for the S&P fell by the wayside, the latest "key resistance level" to tumble in this ongoing advance. The Comp, however, failed to surpass its June 6 intraday high of 1684. I'm sure some skeptics will be talking about this "negative divergence" in an otherwise wildly positive session -- for those long stocks.

"There can be no doubt the mania has once again emerged in full bloom," Alan Newman, the oft-bullish editor of Cross Currents wrote Monday morning, presaging a session that supported his contention. "There are no bears left and no sellers, only bulls and buyers."

Although 85% of the Big Board's 1.3 billion share volume -- light vs. recent levels -- was to the upside, advancers led decliners by a relatively modest 23 to 9 and by 20 to 11 in over-the-counter trading, where upside volume was only 68.4% of the 1.9 billion total. More positively, new 52-week highs swamped new lows 397 to 7 on the Big Board and 247 to 13 over the counter.

On the other hand, "bubbles are usually formed against a backdrop of complacency that in turn allows easy money to feed the excesses," wrote Tobias Levkovich, institutional equity strategist at Citigroup's Smith Barney unit. "When some market watchers worry about the stock price run-up, they often forget to discuss the vast bond rally, which smacks more of a bubble than the bounce-back rally in stocks off of extreme bearishness last October."

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