I noted earlier that there were a lot of reasons to sell, and not many to buy today...but the market rose quietly throughout the morning and afternoon. The Volatility Index (VIX), a fear indicator, is at its lowest levels since October.

While energy and commodity stocks remained strong throughout the day, it was tech, financials, and industrials that provided the market lift midday. There were only 800 stocks advancing at 10 am; but at 3 pm ET, there were 1,600 advancing—twice as many.

A small group of traders are clearly willing to take on more risk, betting that the U.S. economy will improve in the second half and that the Fed has provided a backstop with the Bear Stearns

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[BSC  Loading...      (%)   ] bailout. The majority of the Street thinks these are questionable assumptions, but when you have light volume a small group of early adopters (and it can be as small as 10 percent of the trading pool) with conviction and modest money can move the markets...as they are doing today.

If there is some disappointment, it is in the volume, which is again light. It's been light since April, in fact, on up and down days. Old-school types will want to see a pickup in volume before they are convinced that this is much more than a few early adopters sticking their necks out.

As for Fannie Mae

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[FNM  Loading...      (%)   ] , wonder stock of the day…it’s amazing what short-covering can do. But make no mistake about it: their regulators have reduced their capital requirements, which means they are more highly leveraged than ever, at a time when their credit quality is deteriorating, and they are being asked to take on more and more of the burden of the housing industry. Professional financial traders I spoke to today through up their arms in frustration over this one.

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