Has The Market Discounted The Credit Crisis?

Today was about as good as can be expected. If I had told you that Bear Stearns (BSC) was bailed out for $2, Asian stocks were plunging, and the futures were pointing to an ugly day, you likely would have assumed the Dow was going to be down big.

But after falling "only" 200 points early on, the market rallied back late in the day, and it looked like the Dow might close up over 100 points until a last minute selloff took back some of the gains.

This was a far better than exepcted outcome, and has to be viewed as a victory for the bulls. The market's ability to take this watershed event in stride, at least today, is comforting. And there were many large-cap stocks that bucked today's weakness and closed higher on the session.

Also, the VIX spiked to nearly 36, a very high level. The put/call ratios and investor surveys also showed extreme bearishness, which are necessary ingredients for a market bottom.

The S&P 500 broke its January lows on an intraday basis, but there were fewer new lows on the NYSE - a positive divergence. I have not started putting cash to work yet, as I would like to see how the market reacts to the FOMC meeting tomorrow. But I am one of the few people I spoke with all day who thinks we may have seen the bottom.