The markets are putting together one of the few multi-day rallies of the year. The S&P rallied almost 70 points—about 3.8 percent—from bottom Thursday afternoon to the open today.
We are seeing the best 2-day rally for the S&P 500 since August 26 and 27 of last year.
What's changed since Thursday? First, a vague comment from the UAE oil minister that there were efforts underway on a possible production cut, and Deutsche Bank saying they would be buying back some of their debt.
Since then, everything reversed. Bond yields have gone back up. Stocks have rallied. The yen has again weakened.
So far, it's mostly a lot of talk. But it's high-level talk on three of the four issues that are worrying the markets: the oil decline, a sudden devaluation of the Chinese renimbi, and bad loans in Europe.
1.Oil: Russia-Saudi production freeze? No one believes it—and even if they did freeze, production is at historic highs and will not address the oversupply issue. But these are the two biggest producers in the world at least agreeing that something is very wrong. Sure, Iran and Iraq won't comply, but the pressure is building. And even though oil is down, more than 60 percent of the S&P energy sector is up today.
2. China: weak growth is an issue, so traders took note of the record loans the Chinese banks gave out in January. Second, PBOC governor Zhou Xiaochuan strongly defended the yuan, implying there would be no sudden devaluation.
3. ECB: Draghi said he would not hesitate to act at March policy meeting if market turmoil threatens the economic outlook. Deutsche Bank definitely ignited a rally in European banks. Italian banks rallied on vague reports that the ECB or the Italian central bank authorities may start buying bad loans.
4. The Fed: more hikes on hold? On the fourth big market worry—the Fed raising rates—there has been no jawboning in the last few days, but the Fed funds futures market indicates essentially no hikes for 2016.
The fact that the market has held up well today despite a modest drop in oil is a good sign.
But it's not good enough. So much damage has been done that no one will believe anything until we put together a string of up days.
We have not put together a three-day rally in the Dow or the S&P 500 since December 21st to 23rd of last year.
All brief rallies this year have been met with new Supply (new rounds of selling). And Demand (buyer interest) has not been high despite the lower prices.
So this is still a show-me rally. Raymond James Jeff Saut expressed the sentiment of a lot of traders this morning in his note. He wants to see convincing follow-through: "I am still waiting to see if the equity markets can string together more than three consecutive positive sessions to break the back of the current selling stampede."
--CNBC's Peter Schacknow contributed to this report.