You've got to hand it to Ben Bernanke. He's not going to let this economy drift off into a deadly sleep without trying every spell-breaking trick in the book.

Today's announcement from the Federal Reserve may prove to be the kiss that finally rouses Sleeping Beauty. For months, the nation's central bank has used a variety of monetary tools, conventional and unconventional, in an effort to break the credit markets out of their deepening coma.

The Fed has engineered a steep drop in the interest rate that banks charge on short-term loans to each other (federal funds). Since December, the Bernanke team has also loaned as much as $160 billion to banks through a special short-term auction facility.

What makes today's initiative any different? For one thing, size. The Fed is enlarging its program to $200 billion. In addition, 20 of the "primary" dealers in government securities (the Merrill Lynches and Morgan Stanleys of the world), as well as commercial banks, can now obtain cheap credit from the Fed. The borrowers can also put up a much wider range of collateral, even including bank-issued mortgage paper (as long as it's triple-A rated).

Judging from the stock market's exuberant reaction to the news, I suspect that the Fed has at last found the magic formula that will end the credit crunch. Not tomorrow, of course. But by the end of this month or early April, we should begin to see unmistakable signs that that the panic is subsiding.

Today's market action brought us the first 9:1 volume day on the NYSE since late November. (The number of shares traded in advancing stocks exceeded that in declining stocks by more than 9:1.) As you know, I've complained that the absence of a 9:1 session made January's market bottom suspect. Now the defect has been repaired.

Ideally, the market should advance for another two to four days, then pull back sometime next week to the vicinity of yesterday's lows (around 1270 on the S&P). On that pullback, I'll be looking to buy leveraged vehicles, such as call options and double-bull funds, to bet on the upside.

The dramatic takeover/bailout of Bear Stearns by J.P. Morgan Chase over the weekend prompts me to share a few thoughts.

Clearly, investors in Asia who heard about the deal Sunday night, and Europeans who got the word Monday morning, were shocked by the terms. Stock markets everywhere outside North America plummeted.

In the early going, it looked as if New York would follow suit. But then, a few brave hearts stepped in to bid for a select list of stocks -- mostly blue chip industrials and utilities, not financials. Among the financials, J.P. Morgan Chase (NYSE: JPM) itself was the exception, rocketing 10% on the day.

Is Wall Street correct to view the Bear Stearns buyout as a win-win for Morgan's ultra-shrewd CEO, Jamie Dimon? Probably. Even if screaming Bear shareholders force JPM to kick in a few extra bucks to seal the deal, the $2 per share price Dimon agreed with Bear's board of directors creates such a low hurdle that it's hard to imagine JPM reaping anything less than a bonanza on the Bear acquisition.

At the same time, you have to ask yourself what this kind of pricing tells us about the current health of the financial markets. When the stock of a prominent, well-established firm like Bear Stearns can drop 91% in two days, it's apparent that "liquidity problems" have morphed into something bigger -- and more dangerous.

I remain hopeful that the Federal Reserve has finally gotten its hands around the issue. Last week's announcement that the Fed will now lend directly to government-securities dealers as well as commercial banks (and will accept a wide variety of collateral for the loans) may mark a turning point.

However, I also advise you to proceed cautiously with new stock purchases, emphasizing blue chip growth names and high-grade utilities. If you feel like speculating, do it with index call options. They're expensive, but at least your risk is clearly defined. If you bought some calls at or near today's opening, you should be pleased with the result so far. Take profits if your gains mount to 50% or more.

Until next time...

Do I dare say it? I don't want to jinx myself, but it sure seems as if -- finally -- the coast is clear for long suffering stock investors. Earlier this month, the market put in a climactic low with many striking technical resemblances to the great bear market bottoms of the past.

And the rally we've seen in the past week or so is no slouch either. In terms of volume and breadth, as well as percentage gains, this move has the earmarks of a big, new uptrend that could carry the blue chip indexes to all-time highs by late 2008 or early 2009. Dow 16,000 here we come!

In short, we're now at one of those market junctures where the outlook is reasonably clear and time is of the essence. Time is of the essence? Yes, for you and me and anybody else who has money lying around that we could invest in stocks.

It's a fact of history that the market racks up its most dramatic gains in the opening weeks of a new advance. Later on, momentum fades and fewer stocks pull the indexes along. Now is the time to get aboard for the fattest, safest profits.

In the very near term (next two or three trading sessions), we're due for a modest pullback of perhaps 1%-3%.

What to buy? I'm warming to the oil stocks again. Yes, I recognize it's possible the energy sector could get roughed up a bit if the price of crude skids into the low $90s or upper $80s this spring. However, many leading oil stocks have come down sharply from their highs of three months ago. But stay tuned. I'll update you further once we have a clearer idea of which direction oil prices are headed.