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A Short Covering Rally

Stocks rallied on the hopes that the "stew" of TARP, TALF, Geithner, stimulus and mark-to-market talk might gel into something palatable, something that will help stabilize the economy.

If that's the case, then shorting certain groups may become riskier.

Indeed, the most notable rallies today have occurred in builders, banks, and retailers—all heavily shorted groups.

The other major move is to buy beta, sell defensive names. In other words, techs and some commodities (Potash , Mosaic ) moved much more than, say, utilities this week, another sign traders were slightly more comfortable with risk.

For the week, the NASDAQ is up nearly 7.5 percent, while the Dow is up 3.3 percent. This is the first full week this year the Dow has been up (only the second time in 10 weeks), but more importantly it is very rare for the NASDAQ to outperform the Dow by 4 percentage points.

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