We saw extreme call buying yesterday at both the ISE and CBOE. Both the ISE and CBOE equity showed the most call activity since the rally started. Anecdotally, it seems everybody thinks buying stocks is easy money after the S&P 500 has already risen 16%. Everybody who was looking for a "sell the news" pullback has thrown in the towel. This is what the end of a rally feels like.
Normally, I would feel very comfortable shorting into this type of activity. However, the time of the year makes me a little nervous with my short position. Its the time of the year when rallies often go further than they should. In late March sentiment was at an extreme but the positive seasonality in April allowed the rally to extend. If it were May instead of November I would probably have a short position double the size that I am currently carrying.