First Whitney, now Roubini.

The Dow caught a bid Thursday afternoon, once again rallying to finish near the highs of the session, extending a three-day rally to four. The Dow is now at its highest close since June 12, thanks to the 7% gain so far this week.

Monday saw a sharp rally thanks to Meredith Whitney's call on Goldman Sachs ( GS), while today's rebound came thanks to positive comments from RGE Global Monitor economist and New York University professor Nouriel Roubini.

Roubini, a noted bear who had warned about the financial crisis before it unfolded, said that "worst is behind us in terms of economic, financial conditions," according to Reuters. Roubini also brought up the idea of a second stimulus package, one in a range of $200 billion to $250 billion, arguing that a program "can not be too small, but it can not be too large."

As the headlines crossed, the Dow started its ascent. By the end of the session, 26 of the Dow's 30 components were in the black, lead by advances of 3% or more in Alcoa ( AA), American Express ( AXP), IBM ( IBM) and Disney ( DIS).

The run higher is surprising, as many investors expected some backing and filling after the recent rally. Robert Pavlik, chief market strategist with Banyan Partners, said that Roubini's comments forced those short after yesterday's rally to cover, which lead to the sharp advance.

Tomorrow's trading direction, though, is anyone's guess. While IBM stunned analysts with its second-quarter results late Thursday, we still have to sort through earnings from General Electric ( GE) and Bank of America ( BAC).

Oh, and those positive Roubini comments from Reuters? The economist clarified his statements after the market closed Thursday, arguing that they were taken out of context.

"It has been widely reported today that I have stated that the recession will be over 'this year' and that I have 'improved' my economic outlook," Roubini said in an emailed statement. "Despite those reports -- however -- my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context."

Welcome back, shorts.

(At 11:45 a.m. EDT)

Thursday's chart of the Dow Jones Industrial Average looks like a rollercoaster, although the range has been pretty tight. At its best, the blue-chip average has been up as many as 38 points, and it has been down 32 points at its worst. Lately, the index was only 3 points lower.

Disney ( DIS) has been a bright spot on the Dow, leading the 15 advancing components with a gain of 1.7%. Sanford Bernstein upgraded the home of Mickey Mouse to outperform from market perform. Analyst Michael Nathanson cited the strength of the company's cable networks as well as its upcoming movie release schedule, which includes Toy Story 3.

On the other hand, Bank of America ( BAC), JPMorgan Chase ( JPM) and American Express ( AXP) were among the worst performers, one day after financials were among the strongest performers on the Dow, following reports that CIT Group ( CIT) could file for bankruptcy as soon as Friday.

JPMorgan slid 1.5% despite an upbeat second-quarter earnings report. The bank reported a profit of 28 cents a share, coming in ahead of the Thomson Reuters average estimate of 4 cents a share. JPMorgan said quarterly revenue of $27.7 billion was its best ever for a quarter, easily surpassing the average analyst target of $25.89 billion.

Meanwhile, BofA was the focus of a meeting called by House Committee on Oversight and Government Reform, where former Treasury Secretary Henry Paulson testified he threatened to remove BofA's management if it walked away from the Merrill Lynch deal, calling the threat "appropriate" because their invocation of a Material Adverse Change, or MAC, clause would have shown "a colossal lack of judgment."

Paulson Under Fire

Separately, a Wall Street Journal report citing people familiar with the situation said BofA is operating under a memorandum of understanding that requires it to overhaul its board and address perceived problems with risk and liquidity management. The MOU gives banks a chance to work out their problems without the glare of outside attention, the report notes.

Revisiting yesterday's discussion about whether the Dow has come too far too fast (470 points, or 5.7%, in three days), Canaccord Adams director of research Eric Ross said in a research note Thursday that the recent rally looks to be weakening from the inside.

"Stocks are still plateauing at high levels, implying the rally is still getting tired," Ross wrote. " About 70% of Nasdaq names are above their 150-day moving averages (that's a big number implying a breakdown is coming, unless this is a continuing extended rally). This obviously didn't stop the rally off of earnings, but implies we probably don't have far to go before we stall out."

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