I've been spending this week analyzing different indicators that are signalling a sustainable rally is at hand. Obviously yesterday's 400 point ramp in the Dow served as confirmation of my earlier speculation. But even though the Dow is up big from its recent lows, there still may be more upside over the next few weeks or months.

On Monday I wrote about the importance of the yen. Yesterday, I analyzed the VIX. Today, I'm going to take a look at the NYSE Bullish Percent Index.

The bullish percent index is by far my favorite broad market indicator. It's an amazingly accurate oscillator that can help you time turning points in the market.

The indicator has been in oversold territory for about two weeks. Oversold is defined by the 30 level; anytime the indicator is below 30 the market is oversold.

A reversal higher, from below the 30 level, is one of the strongest bullish signals that the indicator can generate. Yesterday, the index finished at 29.08. Today, I suspect it might cross 30. That would confirm the recent action we've seen in the broader market and other indicators.

The explosive moves we've been seeing in oil and gold are, in part, due to the dropping dollar. Keep close watch of the greenback if you're trading these, and other, commodities.

An easy way to track the greenback is through one of the currency share trusts. Several of these trusts exist, pitting the dollar against one foreign currency or another. Here are some of the more popular:

• FXE - Euro vs. U.S. dollar
• FXB - Pound vs. U.S. dollar
• FXC - Canadian dollar vs. U.S. dollar
• FXY - Yen vs. U.S. dollar

If these currency trusts are trending higher, then it means the dollar is getting weaker. A weaker dollar will help oil and gold continue higher.

Of the four currency trusts above, perhaps the FXY is the most important. There's a strong correlation between a rising FXY and falling S&P 500. Quite simply, a higher FXY will result in lower stock prices in the U.S.

The FXY has had a good run recently, culminating with a gap higher this morning. The FXY, however, is coming off of its highs today and pulling back a bit. This action in the FXY (pulling back) is lending some support to stock prices today.

Watch this relationship closely this week as the S&P 500 is resting on important technical support and could cascade lower should the FXY continue higher.

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The Dow Jones Industrial Average ($INDU) staged a massive intra-day rally of 450 points. After opening the morning down 250, the Dow closed 200 points higher.

The prediction that we made at the beginning of the week has most certainly come true. Huge levels of volatility are coming into the market. The day-to-day swings in stock prices are stunning. That's why it's so incredibly important to carefully pick your spots and use good judgment when selecting stocks.

We're doing just that, in real-time, on this blog with the likes of Ryland (RYL), Marriott (MAR), and most recently Wal-Mart (WMT) and Home Depot (HD). We're looking for high probability patterns in controversial places and we're having success doing it.

But don't be fooled into thinking that the bull market has returned. We're still in a deeply oversold market, one that can bounce further. But the tide changed last fall from bullish to bearish.

In the short-term, the market might continue swimming against the tide. Watch for the Dow to keep climbing higher along its short-term bullish channel. The index broke resistance at 12,500 today, using the pattern of higher highs and lows to do it. But the first sign of a breakdown from this channel could trigger the next round of selling.

The short-term bullish channel in the Dow could eventually morph into a bearish flag, or a continuation of the slide that began four months ago. The risk of a breakdown in the very short-term is small, but the higher the Dow (market) goes the more the risks increase.

One risk on the immediate horizon is the non farm payrolls number set for release Friday. The labor market in the U.S. is on shaky ground and could cause a near-term reaction in stock prices, potentially impacting the likes of WMT and HD. We'll have more on the non farm payrolls number tomorrow.

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The Dow reached 12,681 after the Fed's announcement. The index closed at 12,442. That was one hell of a swing in an hour of trading.

We talked about the idea, just before the Fed's announcement, of traders becoming fearful if the Fed cut by 50 basis points. Sure enough, the fear materialized in the form of a massive pullback this afternoon.

We'll watch how the Dow trades around 12,400 tomorrow morning as a proxy for the broader market. A breakdown should set the stage for additional retracement of recent gains.