The indices were flat to down, breadth was negative, and the dollar was stronger, but we still had some very strong pockets of momentum. Gold and silver ignored the strength in the dollar for some reason and were hitting new highs. We also had strength in uranium, coal and a number of other commodity-related names.
The hot money was also chasing a number of small-cap China names like NEWN, SOHU, JOBS, SPRD, etc. Quite a few of these China names are reporting in the next two weeks, and many of them do not have published earnings dates, so be careful if you are playing them. Some of the names are exceptional values, but there is a lot of risk due to poor corporate governance in China, so many of the stocks have substantial discounts.
These very stubborn pockets of strong momentum tell us that market players have been doing well chasing stocks, and they don't want to stop. They are looking hard for new opportunities, and in some cases, they become self-fulfilling prophecies.
This rally has been running for some time now, and plenty of stocks are extended, so it is very tempting to look for a top in the indices. The problem for the bears is that the buyers are staying extremely stubborn. Dip-buying hasn't failed in quite some time, so why should they suddenly give up on it? The bulls need to be burned a few times to temper their enthusiasm, and then the bears will finally be able to make some progress, but so far we haven't even had a single bad day of action.
You can either anticipate weakness or you can wait for it and then react to it. Too many folks have been anticipating, and they are sitting on the sidelines and providing underlying support. Wait for some actual weakness to occur before you become too negative, or you will risk missing out on some good trading.