Catharsis on Wall Street?

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SCOTT OLSON/AP

Market Reporter Patrick Zamkin signals price fluctuations

Some said it was the news that the Pentagon was getting close to showtime — fighter jets are being moved to the Gulf, deployment orders issued, a military response starting to take shape. Some said the sight of Alan Greenspan and Robert Rubin shoulder-to-shoulder again and talking with congressional leaders about how to save the economy stirred a rush of Proustian memories of those golden, olden days of the late '90s, when bankers fought the wars and soldiers stayed home.

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Some said — with a real sense of hope — that the sellers finally ran out of tears.

Imminent war, imminent stimulus, the long-awaited capitulation-cum-rebound — take your pick and call me in the morning. But something rode in late Wednesday to the rescue of what was about to be a very depressing selloff. Mondayís unflinching sellers had taken something of a breather on Tuesday, reviving the usual optimistic talk that the long-awaited bottom had maybe been reached by Mondayís rational rout. But on Day Three it was back down the slippery slope.

By 3:30 p.m., the Dow had slid more than 400 points and the NASDAQ more than 100, and if youíre looking for trends, the only thing worse than two straight days of hard-and-fast selling is two days of hard-and-fast selling sandwiched around a deep breath.

Chart mavens know it as the stairway, and the worry is that the investors running out of the market stop, think it over — and then keep right on running. The bad mood was sensible enough — American Airlines announced 20,000 job cuts, and those ripples claimed Boeing, which despite an expected boost for its defense business said that the expected commercial-jet slowdown manufacturing would cause it to lay off 30,000 of its workers. And when it became apparent that institutional investors — the big money — was leading the stampede that pushed the NASDAQ below another long-ago low of1500, the mood started to look a lot like panic in the face of immeasurable uncertainty.

Then it happened. Around 3:30, some short-covering kicked in (Osama bin Laden isnít the only one shorting this market; mutual funds do it too), the selloff skipped a beat, and a funny thing happened: It caught on. The market bellwethers exploded, the losers stormed back, and what had been a troublingly indiscriminate selloff — and a plumbing of index levels not seen in three years — became a fast-building, last-minute comeback that left the Dow down only 144 points and the NASDAQ off by only 27.

Some called it the capitalist equivalent of sinking a 30-foot putt for a triple bogey, and merely shook their heads. But the same technical-minded folks who hate the sight of a downward staircase were feeling mighty good about the spike at the bottom of the three-day slide. To them, it looked like the sellers had gotten tired of selling, tired of assuming the worst about corporate earnings and capital investment, tired of worrying about how far consumer confidence will have fallen when the first post-disaster reports hit the Street. Tired of fear.

Maybe, just maybe, Wall Street has had its catharsis and is finally ready to be our harbinger again. Maybe this is the patriotís rally after all.