Monday, the stock market stumbled, breaking a four-day winning streak at the first shallow resistance zone bounded by S&P 500 742 to 780. Yesterday's high for the index was 774.53.

It is clear that the reversal for the S&P resulted from afternoon profit-taking, so the index could spring back as early as today.

More ominous, however, was the Nasdaq's tape action.

On Thursday, the S&P 500 closed above the 20-day moving average at 745.10 for the first time since Feb. 9. And it closed above the resistance line drawn from the November low at 741.02 for the first time since Feb. 13.

Volume for each of the days of higher prices increased to more than 1.8 billion shares on the NYSE, and that is a higher-than-average volume for any month this year (1.6 billion average). But volume has been picking up since the breakdown on Feb. 27, at S&P 500 740, when more than 2 billion shares traded.

With a reflex rally now under way, the question is: How far can it go?

Tuesday's 6.4% rally on the S&P 500 was the best single day in almost four months. And an internal indicator, the NYSE A/D ratio, registered its highest number since Oct. 13, at 12.75.

Also, volume was above the average volume of the past three months and was more than 40% over Monday's volume on the NYSE.

Most analysts attributed the rally not only to very oversold readings, but primarily to the announcement of profits by Citigroup (NYSE: C) for both January and February.

But if that's the case, why then didn't the market follow through yesterday afternoon when JPMorgan Chase (NYSE: JPM) said that it too scored profits in those months?

Today, I want to examine what others are thinking about this market.

I read Peter Brimelow's refreshing column, and on Monday he summarized the prognostications of some of the popular letter writers:

"Astrology oriented Crawford Perspectives ... up 50.75% last year, said, 'There are evidences that our whole system is melting down, and that could certainly disturb the normal cyclic flow. We believe that will NOT happen All At Once or Right Now! Even a drowning man gets a last breath or two before going down for the count.'"

Just one day after hitting new lows, the major averages reversed course for the strongest day in a month.

The rally was touted as a response to Chairman Bernanke's testimony and the anticipation of the president's speech. But technical analysis has been telling us that the markets have been due for a rally.

I pointed out in yesterday's Daily Market Outlook, that the market was so extremely oversold that a rally was overdue, despite new lows in the Dow, which confirmed that the bear market was still with us.

Tuesday's sell-off may have been a classic case of buy the rumor/sell the news -- heightened a bit by the president's anticipatory remarks at his first press conference on Monday.

Whatever the reason for Tuesday's sell-off, it will no doubt terrorize the public and have the letter writers running for even deeper cover.

The struggle between the bulls and bears continued on Friday with what appeared to be a victory for the bears. And, long-term, they do have the edge since there is little doubt that every major index is still pointing south.

Friday's close at 8,001 on the Dow surely got the bulls' attention, as 8,000 appears to have some psychological importance to the investing public. But it has little technical significance.

The support line that has held since November (with the exception of the bear trap of Nov. 20 and Nov. 21) is actually at around 7,940. And the numbers that most technicians refer to as "the" market's support is at the zone between S&P 500 800 and 820.

For guidance at crucial moments, I prefer to check out the most reliable internal and sentiment indicators.

Stocks advanced for the fourth day for the best sustained performance this year, but as I read the after-market reports you would think that the apocalypse was just around the corner.

There were comments like "no evidence to support that view," referring to world banks' success in reviving economies.

Or how about, "The bottom line is, earnings are dwindling. And it's a lot worse than it looks, when you look year to year." Or, "Obviously the news background is favorable today, but this is just another rally in a bear market."

With all of the gloom and doom, here are a few facts to ponder:

The major market indices indicate that a short-term rally is due.

Our internal indicators, chiefly the Moving Average Convergence/Divergence (MACD) and momentum, are oversold, and the stochastic has issued a short-term buy signal.

Additionally the sentiment indicators, chiefly Investors Intelligence, the American Association of Individual Investors' (AAII) sentiment survey, which has been very bearish for three weeks, and the CBOE Volatility Index (VIX), tell us that the public is bearish and insiders are bullish.

Even though the trading targets could be as close as Dow 8,500, they could also extend to the top of the three-month trading range at Dow 9,300. This may seem like just more of the same type of sideways trading that we've become used to, but it could also mean that a major market base has formed.

Despite the overwhelming tide of bad news from Q4 earnings reports, stocks not only held above the support line at Dow 8,000 and S&P 500 800 Monday, but the stochastic indicator on both the NYSE Composite Index and the Nasdaq issued buy signals.

Our other internal indicators are still oversold, and the CBOE Volatility Index (VIX) fell to 45.69 and appears to be headed lower -- which is generally a bullish sign.

The key, however, to moving the markets higher could be the financial stocks.

This week, a number of closely watched banks, such as Dow members American Express (NYSE: AXP) and Wells Fargo (NYSE: WFC), will report earnings. The expectation for all of these former finance powerhouses is low, so upside surprises could have a positive impact on the Dow.