Trader Talk

Midday market report: Classic relief rally

Trader on the floor of the New York Stock Exchange.
Getty Images

A classic relief rally...7-to-1 advancing-to-declining stocks. Cyclicals advancing along with defensive names. Eight of the 10 S&P sectors up more than one percent. Volatility Index (VIX) reverses and drops from 16 to 14 and change, back to its recent trading range.

We are once again at historic intraday highs in the , the S&P MidCap, and the small-cap Russell 2000.

When the market moves up this quickly...particularly when it hits new forces people to act and get in.

There is heavy volume in the Russell 2000 ETF (IWM)...midway through the day, it has already done a full day's volume, and that is significant. This is a huge hedging vehicle for active traders.

What's up? It was always unclear what the scope of the military action in the Ukraine would be. It still is, but an outright invasion of the whole country--with tanks rolling into Kiev--now looks very unlikely. A lot of traders assumed the tension in the Ukraine would go on longer. It still isn't over, but there is certainly a sense that there has been a de-escalation of sorts.

Why? As I pointed out in my TraderTalk note this morning, Putin is likely reacting to economic issues over geopolitical issues. "The economic burden that it can impose on Russia is tremendous," one international trader said to me. "Putin's a smart guy, and he knows his fragile government cannot withstand that economic hit (which gives rise to civil unrest, and often times, revolution) and so he will come quickly to the table."

If this story stays relatively quiet, we will quickly shift to Friday's February Jobs report. Everyone knows the survey week was a bad weather week, so a poor payroll number will likely be discarded quickly, even though it would be the third one in a row.

A stronger report would encourage risk-on.

The market is now up more than seven percent since the February 5th low.

By CNBC's Bob Pisani