The strong rally of the past month has been a relieving of the oversold condition and the extreme pessimism that prevailed at the end of August. I will be the first to admit that I have underestimated animal spirits in the past but I don't believe that the rally can continue in the same fashion without something more than continued performance chasing.
We could slowly work our way higher on performance chasing and positive seasonality but I would envision more see-saw type action where the up moves are slightly larger than the down moves. There is only one scenario under which I could imagine a strong thrust higher and that is an M&A/LBO boom. There has been a lot of talk about deals in the pipeline but precious little action.
The ingredients for an M&A/LBO boom are in place. The corporate debt markets could not be more accommodating and valuations in many parts of the market are reasonable. Its just not happening yet. Large one time dividends or buybacks from the likes of Google and Apple would serve a similar purpose.