Pisani: The Real Reason Financials Are Gaining

The big moves up in select financials has a confusing number of possible reasons — but concentrate on the most important one.

Citi's successful pricing of its trust preferred is a good sign that banks will be able to raise additional capital. There have been very few trust preferreds issued recently and this is a bit of a green sign.

Many regional banks need to raise capital, and they have been moving on this news as well.

Regional banks have seen a strong move up in the past two days — for example, Regions , Huntington Bancshares , and Zions , for example.

Many of these stocks also have high short interest. In the case of ZION, 21.9 percent of the float is short, a very high percentage.

Meanwhile, high-volume, low-quality financials are again strong today on heavy volume — AIG , Fannie Mae , Freddie Mac .

While the silly rumors about the government trying to restrict short selling in these names has been shot down, they continue to trade on momentum and short covering.

We've seen this movie. Remember, this melt-up on short covering happened in a much bigger way last August, when AIG went from $12 to $50 in a few weeks, Fannie went from $0.60 to $1.80, and Freddie went from $0.60 to $2.10.

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