In his latest letter to clients, Art Cashin's tries his best to explain yesterday's unprecedented market melt up, or as he puts it, how "Technical Levels, Algorithms And Even Dow Theory Help Rout Shorts"
Wednesday's opening gave no hint of the day that would lie ahead. Stocks opened mixed and indecisive in moderate volume.
The bulls managed to put together a rather half-hearted, meek rally and they spent much of the morning in a very narrow range.
Separately, and unnoticed by most, the Dow Transports embarked on a more intense rally, aided by the airlines.
Around 11:45, a series of electronic buy programs helped lift the Dow and S&P out of the morning's narrow range. I noted that in an email to some friends around noon:
After trading in a very narrow range for much of the morning, stocks are punching toward a new range led by the Dow.
The crude drop below $50 was instantly reversed before equities could react.
What many of us did not realize at the moment was the probability that the buy programs may have been triggered by events in another sector. Just before the buy programs kicked in, the rally in the Dow Transports was shifting up a gear as the index was on the verge of punching through to a new record high. If the Transports made a new record high, it would confirm the record high in the Industrials, thus giving a Dow Theory buy signal.
As that realization spread, the algorithms kicked in with buy program after buy program and the race was on.
The series of buy programs moved the indices up in a nearly a vertical manner until about 2:00 when the buying slowed a bit and stocks consolidated near the highs over the final two hours.
The program buying was broad in addition to its intensity. They produced a whopping 422 new 52 week highs. Advances swamped declines better than 3 to 1. Volume was okay but a bit light for such a huge rally.