As I noted yesterday, Tuesday's trade would be an ideal opportunity for the bulls to catch the bears napping and snatch back some of Monday's losses. They did that and more, sending the major indexes toward yearly highs. The S&P 500 rose 0.7% to 1071.66 and the Dow Jones Industrial Average got a boost from a spate of upgrades, rising 51 points, or 0.5%, to 9829.87. The Nasdaq was no slouch either as the tech-laden index added to yesterday's gains, rising 8.26 points to close at 2146.30, ever closer to the important 2150 level.

Stats Table

Tuesday's trade was basically a complete 180-degree turn from Monday's action. Yesterday, stocks were done in by concerns that the rally had come too far too fast. Not to mention declines among the financials and commodities-related names. Oil was down, the dollar was up and investors just were not feeling all that groovy about equities. Fast forward a mere 24 hours and the script flipped. Investors were once again ebullient and financials and materials names were the toast of the party.

Oil was hampered on Monday by news that Chinese demand is waning, then the Asian Development Bank came out on Tuesday and raised its growth forecasts for China, India and Indonesia. One can only surmise that oil is going to be part of the recipe that fuels the growth in those countries. That news helped crude for November delivery make its way back above $71 a barrel and that of course bolstered the fortunes of Dow components ExxonMobil (XOM) and Chevron (CVX), the two largest U.S. oil explorers.

Crude Chart

The trend of Monday's trash becoming Tuesday's treasure extended to other names that I mentioned yesterday, not the least of which was Caterpillar (CAT). Yesterday, the world's largest construction and mining equipment maker said August sales tumbled 48% on a year-over-year basis. Today, the Dow component got a boost as speculation swirled that global economic growth would fuel increased demand for Caterpillar's products. The stock resumed its recent bullish ways, charging higher by $1.88 to close at $54.34. Despite the glum sales news over the past few months, Caterpillar's chart (below) looks pretty good and you can fetch a fair 3.1% yield for your trouble.

Caterpillar Chart

As I mentioned there was a plethora of Dow stocks that benefited from analyst upgrades today and Hewlett-Packard (HPQ) was among them. Credit Suisse upped its rating on the stock to ''outperform'' from ''neutral,'' citing a bottom in the printer business and improved outlook for HP's hardware business. Credit Suisse hiked its EPS and revenue estimates for HP's next fiscal year, which commences in November, to $4.26 a share from $4.03 on sales of $118.3 billion, up from $117.1 billion.

Allow me to read see the forest through the trees for a minute. The thesis behind the Credit Suisse upgrade of HP, while solid, may have a lot to do with something that did not directly involve HP itself and that would be Dell's (DELL) $3.9 billion acquisition of Perot Systems (PER), which was announced on Monday. More than a few so-called experts have opined that Dell is overpaying for Perot and that led Credit Suisse to downgrade Dell today.

J.P. Morgan Chase (JPM) was another Dow name that was on the receiving end of some kindness. In this case it was rival Bank of America (BAC) upping its third-quarter earnings estimates on J.P. Morgan to 49 cents a share from 46 cents and that was a good for a 4.3% gain in J.P. Morgan's shares. The stock closed at $46.47 and is now within sniffing distance of its 52-week high of $50.63.

Speaking of familiar financials, there was a dash to trash as embattled bond insurers MBIA (MBI) and Ambac (ABK) rose 22% and 14%, respectively. The pops were odd considering there was no news. On the other side of the spectrum was an apparent dash away from trash, at least for a day, as American International Group (AIG) fell more than 5%. The culprit was familiar. AIG apparently has not learned a lesson from other the regional banks as rumors swirled that the downtrodden insurance will commence a secondary share offering.

I should note that the company did not comment on this news, but a secondary offering makes sense because AIG needs the cash. For really no good reason, this stock has been on fire for the past few months, but if support in the low 40s does not hold, there could be more pain on the way.

AIG Chart

Of course, I cannot fail to mention Bank of America, the largest U.S. bank. Even amidst news that Bank of America's executives are meeting with congressional leaders regarding the Merrill Lynch acquisition and increasingly intense speculation that if Chief Executive Officer Ken Lewis is charged with misleading investors by the Securities and Exchange Commission (SEC), he will resign, the stock moved higher.

None of this kept noted bank analyst Dick Bove of Rochdale Securities from upping his price target on BofA to $25 from $19. That's nearly 33% higher than today's closing price. I am not a Ken Lewis apologist, but I keep wondering when cooler heads will prevail and Congress, the SEC and a certain attorney general from New York will realize that Lewis was forced to take on Merrill Lynch and if he did not, what was the alternative? Probably a fall into the abyss for the U.S. financial system.

At the end of the day, congressional ''leaders'' and the New York attorney general do not really care about BofA shareholders. If they did, they would just be quiet. After all, this is one of the most widely held stocks in the U.S. What they really care about is getting reelected to Congress and eventually becoming governor of New York and that serves no one's interests but their own. Bank of America's chart looks fair and it makes me wonder how good it would look with a little less chatter.

Bank of America Chart

Before I get too bogged down in the minutia of individual stocks, it is worth noting that volume was decent today, especially considering that the Federal Open Market Committee commenced a two-day meeting. It appears that Fed Chairman Ben Bernanke is caught between a rock and a hard place as he tries to jolt economic growth while spurring banks to lend more. The likely outcome of the FOMC's two-day meeting will be the Fed leaving interest rates unchanged at 0.25% while saying that limited access to credit is holding back economic growth.

Another interesting tidbit to note is that there eight initial public offerings scheduled for the remainder of this week. That is a pretty robust pipeline given how lethargic the IPO market has been in the U.S. this year. Activity seems to be picking up as of late, as the chart below illustrates, and that is a good thing if you own shares of Goldman Sachs (GS) and Morgan Stanley (MS). This week could prove to be the most active period for IPOs since the end of 2007.

Some of the names expected to make their public debuts this week are Foursquare, a mortgage real estate investment trust (REIT) backed by AllianceBernstein (AB). That deal is expected to price at $500 million. Ladder Capital Realty might be picking a good time to come public because this REIT focuses on acquiring distressed commercial real estate asset. There should be plenty of pickings for the company after its $400 million offering. Perhaps the most widely anticipated new offering is that of China's Shanda Games, the video game business of Shanda Interactive (SNDA). That deal is expected to price at $725 million.

IPO Chart

With an eye toward Wednesday's trade, the news docket is light beyond the Fed update. Treasury Secretary Timothy Geithner is set to testify before the House Financial Services Committee, which might be worth watching for entertainment purposes only. It can be kind of fun to watch the irascible Barney Frank (D-Mass.), the committee's chairman, go to work on those giving testimony.

There are a couple of earnings plays coming out before the bell. AutoZone (AZO), the auto parts retailer that is one of hedge fund genius Eddie Lampert's biggest holdings, is expected to report profits of $4.45 a share. One of my favorite stocks, General Mills (GIS), also reports before the bell and analysts are calling for profits of $1.03 a share.

As investors have renewed their appetite for risk during the recent market rally, General Mills has kind of been left behind, gaining ''only'' 10% in the past three months compared to about 20% for the S&P 500. The stock recently cleared psychological resistance at $60 and if tomorrow's earnings report is encouraging, that could keep General Mills on its ascent toward its 52-week high of $71. If you are not a short-term trader, General Mills has something for you as well. The five-year dividend growth rate is 9% and the current yield of 3.1% is nearly 50% higher than the S&P 500 dividend yield.

General Mills Chart

Taking a look at the charts, it is hard to say that much has changed since I visited with you yesterday, but I looked at a 30-minute chart of the S&P 500 earlier today and it is becoming clear that 1075 looks like the next point of resistance. The 1057 area is the first support area, but a violation of that level could take us to the August peak around 1039. As long as the market keeps bouncing back from days the way it did today, it is hard to argue with the fact that 1100 is going to come into play sooner rather than later.

S&P 500 Chart

Of course everyone wants to know about 10000 when it comes to the Dow. Today's close near 9830 is a good sign and that means 9850 can be taken out with just a lukewarm day tomorrow. The Dow should see support at 9725 and then an even firmer floor at 9625, just below the Augst high, but it is a stretch to think that 9625 is going to be an issue over the next few days. It is probably reasonable to expect some mild consolidation before the Dow ratchets higher.

Dow Chart

As I noted earlier, the Nasdaq is inching ever closer to 2150, and again, it will not take much for that level to be broken as early as tomorrow. The index is a strong uptrend that mirrors that of its 50-day moving average. The 2150 area is where the Nasdaq really started to breakdown last year, but if it can hold there this time and get some help during earnings season, the index could make its way back to the August 2008 high of 2473 before the end of this year. Near-term support can be found around 2118 and then at 2050.

Nasdaq Chart

It is hard to disagree with the fact that ''buy the dips'' lives on and market leadership by financials and materials names indicates risk appetite is also alive and well. None of this changes my stance that stocks are richly valued at this point, but it would be foolish to buck the overall trend.