Is it over? Stocks post first winning week in a month

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Most stock indexes couldn’t hold on to their early gains today, but this still turned out to be an up week -- after three weeks of devastating losses.

Perhaps helped by Warren Buffett’s cheerleading for U.S. equities, the Dow Jones industrials were up as much as 301 points at their peak for the session, but fell back to close off 127.04 points, or 1.4%, at 8,852.22.

Most broader indexes also were modestly lower for the day. But winners still outnumbered losers by 5 to 4 on the New York Stock Exchange. That marks the fourth day in five that market breadth has been positive, a trend that heartens the bulls.

For the week, the Dow advanced 401 points, or 4.8%. That followed a cumulative loss of 25.8% in the three previous weeks. The Standard & Poor’s 500 gained 4.6% this week. The Nasdaq composite rallied 3.8%.

There were more signs of improvement in credit markets today, including another drop in the banking industry’s benchmark Libor rates (London interbank offered rates).

After Monday’s huge snap-back rally -- when the Dow rocketed 936 points -- the stock market plunged again midweek. The Dow early Thursday fell below its five-year closing low of 8,451 reached Oct. 10, but then rebounded to close higher for the day.

That looked like a classic successful ‘retest’ of the lows, a pattern that suggests the worst is over, at least for the short term. See this earlier post.

But by one measure, investors’ fear level remains extreme. The VIX index, which measures expectations of near-term market volatility, set a record closing high of 70.33 today, although that was below the all-time high of 81.17 reached intraday Thursday.

The VIX historically has been a good contrarian indicator: The more frightened investors are, the more likely it is that the market is close to bottoming.

But before the last few weeks, a reading of 40 on the VIX had constituted extreme fear. The index blew through that level, and through 50, 60 and 70 as stocks continued to plunge.

Wall Street tends to abuse words like ‘unprecedented’ and ‘historic,’ but there’s no other way to describe what we’ve been living through in financial markets since the beginning of September.

Is it over? Anyone want to hazard a guess?