Many of the gaps higher in recent trading sessions have been fueled by short covering as well as buy stops in the S&P 500 Index futures and related derivatives.

For example, on Wednesday we saw a large S&P E-Mini futures buy stop order at the 1210 level in the SPX take the market up to the highs of the day, and upon completion, the index fell back somewhat. In other activity, with the CBOE Volatility Index (VIX) falling about 5% (it was down as much as 8% intraday yesterday), buyers of puts returned in the index. [ETF Chart of the Day: VIX]

Buyers of November 25 puts were present, and these institutional players have been accumulating these puts now for a few sessions as well as playing the January 25 strikes.

In previous recaps we have also mentioned call buying in ProShares UltraShort 20+ Year Treasury Bond (NYSEArca: TBT), which is equivalent to getting short iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) and betting that long term Treasury bond prices will fall (and yields will rise). [Bond Fund Outflows]