It is now being almost confirmed that the current rally has not been lead by bulls, but actually by bears, trying to escape what seems to have been a very successful bear trap.
The reasons? Volumes on the markets have been very limited for several months now, but the current rally has been some sort of self-fulfilling prophecy: the higher the markets, the more the bears felt in the trap and lost faith, buying into this rally to cover their shorts, or worst, buying because they have been sucked into believing in the V-shaped recovery and this mass hysteria with the clueless media acting as cheerleader.
As Adam Hamilton said last week: Realize that always in the markets, price action drives newsflow. It’s not the other way around as most people assume. When prices are weak, we all have a natural selection bias to seek out bearish stories in an attempt to “justify” the decline. The financial media greatly amplifies this tendency
I have been discussing this on these threads from Sovereign Speculator:
Zero Hedge. It seems like most of the short positions have now been closed (click for bigger image):