Stocks Get With the Program

"I didn't see anything fundamental that occurred at 2 (p.m. EST) to cause this rally," said Tim Heekin, director of trading at Thomas Weisel Partners in San Francisco. "When I see a rally in the last hour [or so], it's often program-related."

Computer-driven buying by "passive indexers" could explain why many participants said Wednesday's session was quiet, although trading volume was up notably from recent levels. Over 1.5 billion shares traded on the Big Board and 1.2 billion in over-the-counter activity.

In addition to program buying, Heekin attributed the advance to an abatement of previously "relentless" selling pressure and some covering of positions by "smart shorts watching technicals." These included the 785-787 level on the S&P futures, which the trader said marked a 75% Fibonacci retracement of the rally off the October lows. (Pit-traded S&P 500 futures traded as low as 788.50 before settling at 805.70.)

On a similarly technical note, some bears may have been cowed by a drop in bullish sentiment in Chartcraft's Investors Intelligence survey to 39.8% from 41.6%. Although bearish sentiment also fell, to 37.5% from 38.2%, a drop below 40% bullishness has coincided with short-term reversals in the recent past, as Jim Cramer has repeatedly noted.

Also, the CBOE Market Volatility Index rose above 40 intraday -- trading as high as 41.16 before settling up 2.4% to 38.99. The VIX hit 40 before inflection points in July and October, although it ultimately moved much higher in both episodes, and the S&P 500 fell at least another 10% before reversing.

Finally, while European bourses remain mired at multiyear lows, U.S. averages remain stubbornly above their October lows, save the Dow Transports. To optimists, that's a bullish sign, or "positive divergence" in technical parlance.

Hard-core bears ("Paranoia strikes deep") say "poppycock" to all this, suggesting a retest, and breach, of the October lows is inevitable, noting market breadth favored decliners in both Big Board and over-the-counter trading. Skeptics also contend there are far too many folks trying to call a bottom for one to materialize, or for any rally to be sustained. Certainly, there's no shortage of bottom-pickers out there.