The S&P/ASX 200 index extended its rally on Friday to close 0.8 per cent higher at 3675.3 points, the highest point since 14 January this year.

The index has now gained 16.8 per cent since it started its climb on 6 March and investors are starting to wonder whether we are seeing a sustainable rally.

While it is difficult to suggest when the volatility in the markets will end, there are signals the Australian market is closer to the bottom than at any stage over the past twelve months, Lincoln Indicators chief executive Elio D'Amato said on Friday.

"Now more than ever, investors need to be exposed to the share market and position themselves in order to capture the value that is everywhere," D'Amato said.

The recent rally of the Australian market is in large part a result of optimism on the US trading floor.

The Dow Jones Industrial Average has risen by more than 20 per cent since it reached a 12-year low on 9 March, and there is reason to assume it will rise further after the publication of positive US housing market and durable goods data.

New home sales in the US came in above market expectations in February, and orders for airplanes, appliances and other major items saw an increase.
 
Sentiment was further supported by better-than-expected profits from US consumer brands including Best Buy, ConAgra Foods and Dr Pepper Snapple Group.

In Australia, bank chiefs have added to the bullish sentiment by providing positive comments.

National Australia Bank chief executive Cameron Clyne said last week that the worst might be behind us, while Commonwealth Bank of Australia chief executive Ralph Norris said the bank was one of the most strongly capitalised in the world.