The worst may finally be over for stocks

How CNNMoney's Fear & Greed Index works
How CNNMoney's Fear & Greed Index works

Where have all those scaredy-cat investors gone?

The Dow was up more than 200 points Monday, extending last week's winning streak. The S&P 500 and Nasdaq have each gained more than 7% from the multi-year lows they hit back on February 11.

The big spike in oil prices in the last couple of weeks has helped. But investors also don't seem as worried as they did just a few days ago.

CNNMoney's Fear & Greed Index, which measures seven indicators of investor sentiment, is now in Neutral territory. It had been showing signs of Extreme Fear for most of this year.

Market volatility has died down considerably. The VIX (VIX), a gauge of volatility that is part of our Fear & Greed Index, has fallen 35% since February 11.

Related: U.S. recession fears fade after market rally

So is the worst over? Or is this what traders like to morbidly call a dead cat bounce? (Two references to cats in one market story. If I just add a feline GIF, this story will be Trump-like "yuge" on social media!)

It is encouraging to see some of the most beaten up stocks, such as energy and other commodity companies as well as banks, rebound so sharply.

Oil driller Diamond Offshore (DO) is up 30% since February 11, for example. Aluminum giant Alcoa (AA) has surged more than 20%. Bank of America (BAC) and Citi (C) have each gained 15%.

The rally in banks is particularly welcome. Many banks have suffered due to worries that troubles in the oil patch will lead to a big wave of energy loan defaults.

Consumers living in states like Texas, Oklahoma and North Dakota could also potentially have problems making mortgage, credit card and auto loan payments. In other words, oil was feared to be the 2016 version of subprime. But that may be an overreaction.

"We still haven't hit the end of this bull market. The challenges in the energy sector aren't spilling into the broader economy," said Hank Smith, chief investment officer at Haverford Trust, in a report Monday.

Another positive sign? Some high quality companies are looking to sell bonds again. Apple (AAPL), IBM (IBM) and Toyota (TM) all raised money through debt offerings last Tuesday.

Related: Why people are freaking out about cheap oil

To be sure, junk bond demand remains weak. That's one of the seven indicators in our Fear & Greed Index and it's showing Extreme Fear.

But if investors are willing to buy bonds from top companies, that could be an indication that the "this is another 2008" story line might be getting tired. The corporate bond market is not seizing up.

"Healthy demand for credit, albeit isolated to the higher quality issuers, is a bright spot," wrote Jason Pride, director of investment strategy with money manager Glenmede, in a note to clients.

Still, investors should be cautious. Just as the pendulum may have swung too far in the bearish direction a few weeks ago, there is now a risk that sentiment is rapidly shifting too far into bullish territory.

Katie Stockton, chief technical strategist with BTIG, wrote in a report Monday that the stock market may now be "overbought" following the recent rally.

Related: Fourth quarter earnings were ugly

It may not take that much in the way of bad news to spark more selling, especially since investors have "become increasingly sensitive to valuations" according to Stockton.

Oil remains the big wild card.

"Stocks have moved in lockstep with oil prices recently and for the stock market to perform better, oil needs to show some stabilization in the $30 to $40 price range," wrote William Lynch, director of investments for Hinsdale Associates.

The good news is that oil is back at around $33.50 a barrel. So as long as oil prices continue to start with a 3 instead of a 2, then the broader stock market should be able to hold onto its recent gains.

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