The “cash for trash” plan debuts and the result is the fifth-biggest point gain in Dow history. Has TurboTax Tim at last undone the damage from last month’s speech fiasco? Hope springs eternal:

The Treasury plan “may be a game-changer, because it’s been sprinkled with some better-than-expected economic data,” says Tom Sowanick, chief investment officer at Clearbrook Financial in Princeton, N.J. “If the tea leaves all start to line together I think this will be the beginning of a major bull market.”…

“You cannot fight this intervention,” Steve Grasso, of Stuart Frankel, told CNBC. “When you start to see the market just climb after weeks and months of being sold out, you have to participate.”

Traders tell the NYT the euphoria’s due partly to the promise of more free money and partly to the good ol’ fashioned certainty that comes with finally having a definitive plan, a point reiterated at length by one of Geraghty’s readers. Is it true, though? Hmmm:

The stock market’s latest bounce had the S&P 500 tallying its best three-day winning streak since late November, yet the CBOE Volatility Index — which measures uncertainty — edged only slightly lower, signaling ongoing wariness about the market’s direction…

“The VIX is obviously responding to the positive action in the equity markets, but the fact remains that north of 40 remains elevated in relation to where it was trading prior to the crisis,” said Dan Greenhaus, an analyst at Miller Tabak.

“There is clearly uncertainty and nervousness in the markets irrespective of the short term move higher and as long as those general feelings continue, the VIX is going to have a hard time moving considerably lower,” said Greenhaus.

Exit question: As much as I hate to agree with him, isn’t Krugman right? Isn’t this just the Paulson plan v2.0?

Update: The plan won’t work, says Henry Blodget, because toxic assets and tight credit aren’t the problem. Debt is. And he’s got the frightening graphs to prove it.

Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears, and they’ll be working it off for years. House prices are still falling. Retirement savings have been crushed. Americans need to increase their savings rate from today’s 5% (a vast improvement from the 0% rate of two years ago) to the 10% long-term average. Consumers don’t have room to take on more debt, even if the banks are willing to give it to them.