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Four Factors That Made A Difference Today

A much better tone to the market as four factors made a collective difference today:

1) oil at 2-month lows

2) dollar rallies to 5-week high

3) consumer confidence stronger

4) Merrill puts a price on CDOs

The good news is that with the S&P closing at 1260, the lows of 1200 or so a week ago seem like a firmer bottom than a few days ago.

The problem: outside of oil, much of the fundamentals have not changed. Traders are not expecting much from the jobs report on Friday, but that's what leaves upside in a down market. With a loss of 75,000 jobs expected, anything near that is likely to help the market. So many traders are expecting another 5 percent move to the upside, but no one is expecting the S&P to return over 1,400 where it was during its recent highs in May.

Bottom line: up is path of least resistance for now.

Finally, what does Merrill's CDO selloff mean for other financials? Is everyone going to have to sell CDOs at $0.22 on the dollar, as Merrill has? Guy Moszkowski at Merrill Lynch says maybe not. A good part of Merrill Lynch’s CDO portfolio is 2006 vintage and above, whereas the largest portion of Citi's CDOs is pre-2006. Citi's portfolio appears to be performing better. As for most other financials, they do not have the large subprime exposure that Merrill has.

Questions? Comments? tradertalk@cnbc.com

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