``But this goes far beyond the shorts,'' he quickly adds. The most encouraging part of the rally has been its fundamental muscle - the rock and substance beneath the broad averages. ``One of the keys right now is the volume,'' says George Pirrone, a trader at Dreyfus Corp. in New York. ``Volume's been pretty damn good.'' Shares traded daily on the New York Stock Exchange averaged 207 million shares a day in the eight-day rally - extraordinary volume during Christmas. Before that, December trading volume had averaged 188 million shares a day.

Breadth - indications of how many stocks are participating in the rally - is encouraging, too. Broader averages and small-stock averages are rallying as strongly as the Dow, a sign that the rally is not just 30 Dow stocks frothing along on wishful thinking. On the New York Stock Exchange last week, there were 1,812 stocks up, vs. 285 that fell. That's the strongest advance- decline ratio this year and the fourth-best ever.

Courtney Smith, president of Capital Management Inc. in New York, agrees the Fed move produced ``a major psychological change. The market sees aggressiveness by the Fed ... that's going to produce a rebound.'' But he notes that for two months prior to the cut, the Fed had been pumping more money into the banking system. ``That money has to go somewhere,'' Smith says. Money looking for an investment home is vital fuel for any stock rally. And with rates so low, stocks are especially attractive.