The mood on Wall Street brightened last week as investors started believing they’d caught sight of a bottom.

After one of the most tumultuous trading weeks in memory – which started with a 465-point drop and included a day with a 600-point swing – stocks of better-performing companies started to rise and the Dow managed to post a 400-point gain over two days.

That’s what a 75-basis-point rate cut by the Federal Reserve and a $150 billion stimulus package will buy you.

“I think we hit a bottom because everyone capitulated,” said one investor, noting that everyone who had a long position finally sold, allowing bargain hunters to push stocks north.

In the meantime, foreign hedge funds were said to be scouting out bargains.

Other signs that the markets may be at or near a bottom include:

* The price of oil again started to rise as speculators believe the consumer, quiet for months, would be likely to spend their tax rebate money.

* Retailers, oil company stocks and infrastructure equities also gained, showing signs of shaking off their slumber.

* “And even when financial stocks gave up some of their gains, the general market didn’t follow them,” said one money manager.

To be sure, bear markets have a way of fooling investors and some on Wall Street are warning folks to ease their way back into the market.

Remember, the short interest on the New York Stock Exchange hit a record high on Jan. 15 – 13.85 billion shares, or roughly 3.7 percent of the total shares outstanding on the Big Board. When the market started to turn on the rate cut and stimulus package, the shorts covering their positions surely gave a lift to the marts.

Kevin Connellan, a top trader at Northern Trust in Chicago said Wall Street certainly cheered the stimulus package and the Fed’s interest-rate cut – but it was a lot of the “short covering” which contributed significantly to any upward moves in stock prices.

Doug Dixon, a trader at Aronson+Johnson+Ortiz in Philadelphia, said that short sellers were likely very active this past week once stock prices started to nose upwards.

“They had to buy and get out of their positions,” he said. “Talk about an about-face. You go to the gym for 45 minutes and then the market moves from down 3 percent to up 2 percent.”

That’s what happened this past week, pros say. “As strange as it may sound, the short sellers, as a result, have been rewarded with huge profits for driving the stock market down. They have a lot of confidence,” said Dylan Wetherill, president of Kansas City-based ShortSqueeze.com.

“I have been amazed by the volume of short selling that has flooded the market,” he added.