It is probably a safe bet that Wednesday's ramp higher into the close left more than a few folks scratching their heads. The move created fresh all-time highs for the S&P 500 and the venerable DJIA. But wait, hadn't the market been hit hard just a couple days back? And after nearly three weeks of sideways action, wasn't everyone under the sun looking for a meaningful correction to begin? So, what gives?

The start to Wednesday's trading offered no sign of what was to come. The Bank of England had gotten the bears' attention by talking about raising rates sooner than had been expected. And there was a fair amount of disappointment over the results of China's latest long-term planning session. And before one could pour a second cup of coffee, the S&P 500 had opened down nearly 0.5 percent.

The opening sell algo pushed the S&P below the prior day's low and to hear the bears tell it, things were about to get ugly.

The Bears Thought They Had a Case

The fact that the market opened lower wasn't surprising. European bourses were down across the board and Asian markets finished with big red numbers. In addition, the glass-is-half-empty crowd could be heard touting the sentiment indicators, which were starting to get a little frothy, and the idea that valuations were becoming stretched.

The bear camp went on to cite the slowdown in revenue growth, the lackluster GDP numbers, and the fact that the gains in housing are unsustainable. Now toss in the overbought condition and fact that the Fed was back to "talking taper" again, and well, it appeared that the traders in the bear caps might just have the edge.

As a result, the bulls could be heard nervously talking about the important support just below. The general thinking was that as long as the S&P stayed above last week's algo-induced low at 1747, things would be okay. But again, there wasn't exactly a lot of swagger seen in the bull camp Wednesday morning.

Everybody knows that regardless of where one starts counting, this bull is getting old. Everybody knows that there is some froth in the mo-mo names. And everybody knows that this type of environment has a tendency to end with a bang.

And They're Off

However, within minutes of the opening bell, the market stabilized. And within an hour, the early losses were erased. And then right before the time traders were heading to lunch, the buy algos arrived. Just like that, the bulls were off and running.

However, most traders recognized that there were some important earnings coming after the bell (Cisco for one) and some fairly important economic data (Retail Sales, US Productivity, and Weekly Jobless Claims) this morning. As such, it was assumed that the move up that had occurred at about 12:15 eastern wouldn't last.

Then The Fireworks Started

But then a funny thing happened. Instead of the expected intraday pullback, another round of buy algos hit the tape. And then another. And then, with less than an hour left in the session, stocks spiked higher, and higher. Boom, there were new all-time highs.

The question of the day, of course, was what had triggered the spike to new highs? There hadn't been any big headlines. Nope, just a lot of algo-induced buying.

Still All About the Fed

Turns out that rumors of what was in Janet Yellen's prepared testimony started making the rounds. And the algos apparently liked what they read.

First there was the fact that Ms. Yellen would say that 7.3% unemployment is too high.

Then there was the comment about the Federal Reserve needing to do more to support the economic recovery.

And finally, the future Fed Chair wrote, "I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy."

Suddenly QE-Infinity was back. Suddenly, traders were reminded of the recent papers written by Fed officials talking about lowering the unemployment trigger. And suddenly, the "Dectaper" seemed like a really silly idea.

Although the algos will start fresh again today and they could always reverse yesterday's "breakout" on the charts in a matter of minutes, it would appear that this market is still all about the Fed. And with Janet Yellen's prepared remarks sounding pretty darned dovish, the bulls may be looking to start the year-end rally earlier than normal this year.

Turning to this morning... Foreign markets largely followed Wall Street's lead and built on the Yellen-induced rally. However, earnings from both Wal-Mart and Cisco have curbed the enthusiasm in the U.S. in the early going.

Positions in stocks mentioned: none

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