Why are we rallying? Trading in large ETFs suggest that selling (at least for the moment) has been exhausted.
Why do I say this? Look at trading in the largest ETF of all — The SPDR ETF.
There was very heavy volume all morning going into the close in Europe at 11:30am ET...shortly thereafter volume dried up for several hours, and we moved sideways...about 1:40am ET, several headlines flashed from Societe Generale in France (reaffirms its weak exposure to peripheral govt debt, says its fulfilled almost all its 2011 funding needs), volume picked up, and picked up again as we passed the highs of earlier in the morning.
This doesn't mean that traders won't try to sell into the rally, by the way.
Elsewhere: what's going on? I keep getting asked why the market is trading in such wild ranges on a daily basis.
It's easy to say, "Stocks are trading on fear and not on fundamentals," and that's certainly true.
But don't kid yourself: in the long term, stocks trade on a multiple of earnings. And that's the problem right now.