Gains Survive Late Fade

Because the E-minis trade at a fraction of the value of their pit-traded counterparts (one-fifth the notional value in the case of the S&P 500) and are electronically traded, they have become very popular with smaller institutions and program traders, who set up computer-driven trades linked to various price points.

"The problem is, guys are stepping all over each other," Sullivan said, suggesting one erroneous trade can trigger a whirlwind of activity among other participants, which appears to have been the case Monday.

There was a similar error on July 3 involving Dow E-mini futures, he recalled, wondering what would have happened had either error occurred during "volatile markets" vs. the current state of relative tranquility.

Easy Living

The market's early climb was spurred by better-than-expected earnings from financial titans Citigroup (C Quote - Cramer on C - Stock Picks) and Bank of America (BAC Quote - Cramer on BAC - Stock Picks), as well as separate merger announcements involving Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks)-Overture and Boise Cascade (BCC Quote - Cramer on BCC - Stock Picks)-OfficeMax (OMX Quote - Cramer on OMX - Stock Picks).

M&A activity, and associated investment banking fees, is one of the few things able to get Wall Street more excited than strength in the financial sector -- job security being crucial to traders' mindset. Evidence of both mergers and strength in financials proved to be a powerful catalyst for buyers early on.

Analyst upgrades of Intel (INTC Quote - Cramer on INTC - Stock Picks) and Johnson & Johnson (JNJ Quote - Cramer on JNJ - Stock Picks) added another impetus to the rally, as did ongoing skepticism about the sustainability of the advance.

Indicators such as the CBOE Market Volatility Index and its Nasdaq counterpart, the put/call ratio, insider selling, Chartcraft.com's Investors' Intelligence survey, and Market Vane's Bullish Consensus indicate a predominance of optimism. Bullishness has also risen in RealMoney.com's survey: to 41% Monday vs. 15% on June 15, while bearishness has fallen to 33% from 53%.

But other indicators and anecdotal evidence present a different story.

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