Did the market make a real bottom or just another low yesterday? We might have expected a rebound following a day when the Dow Jones Industrial Average was smacked with the sixth worse decline in its history on a huge imbalance of downside volume. 

And if you had been out on business or fishing for the entire day and tuned into the evening news, you would concluded, “Ah, yes, a rally back of 53 points, now that’s reasonable.” But what you missed was one of the most turbulent days in market history. 

The Dow industrials not only traded a spread of 640 points from low to high, but made a round trip from a mid-afternoon high to the low of the day and back to a new high of the day for a total accumulation of 950 points — all in the last 90 minutes.

Even veteran stock junkies like me who have been through the “Crash of ‘87” and the “Flash Crash,” along with scores of “Black Mondays,” “Blue Tuesdays,” and other nameless heart-stoppers have to pause and ponder the meaning of the past two days. 

Here’s how I read it: I’ve written many times about “out-of-the-box events” that have an immediate and irrational impact on stocks but have little lasting impact other than creating a short-term bottom or top. Sometimes these events cause an emotional response like the market decline from the famous “Eisenhower heart attack,” but often they result from a borderline economic impact like the Japanese tsunami. S&P’s rating cut ofU.S.debt to AA+ and its refusal to cancel it despite a “miscalculation of 2 trillion dollars” was an out-of-the-box event that triggered a huge sell-off in Asia and a resumption of selling in Europe andAmericaon Monday that became irrational. 

In stepped the computer programs as huge blocks of stocks triggered short sales, when on Monday, the S&P 500 penetrated the November low of 1,173. But computers are programmed by technicians and other analysts, and when the S&P 500 continued into last summer’s trading range, it was time to take cover.

The last opportunity for the shorts to cover with big profits was about to occur. Just after 2 p.m. is the traditional time when final margin liquidation orders are issued. As a result of those orders to cover, longs drove the Dow down 400 points in 30 minutes into last summer’s support zone. Now it was time for the shorts to act, and act they did. The final rush to buy ended with stocks back to the November low at 1,173. Coincidence? There are no coincidences on Wall Street.

Conclusion: An out-of-the-box error by S&P caused an emotional global sell-off. Yesterday’s reversal appears to me to be a meaningful low. But as a friend said to me, “A low is defined by price. A bottom is defined by time and price.”  This low will be tested, and only time will tell if it holds, because there is much technical damage to overcome. But yesterday’s reversal following a bold statement by the Fed that removes the uncertainty of higher interest rates clears the way for a solid recovery.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

• See Serge Berger’s Daily Market Outlook: One More Shot to Play the Bounce?
• See Sam Collins’ Trade of the Day: Citi is a High-Risk Bottom-Fisher’s Dream
• See Serge Berger’s Trade of the Day: Make a Quick Buck on JPMorgan