I don't know what is more amazing. The fact that we are gapping up by 30 points or the fact that so many people are turning bullish now, after a 20% move in the market.

I now believe the market is in its fair value range. We are trading at roughly 13 times next years earnings. That is on the low side but we are in a very high risk environment, so some sort of discount is justifiable.

While I believe the market is roughly fairly valued, the market often over shoots and will likely do so again. We had extreme negative sentiment a few weeks back. That is generally followed by extreme positive sentiment, which we have not seen yet. Market participants are underweight and we are headed into the strongest part of the year.

I have greatly reduced my long exposure into this 20% move but am remaining moderately long. The main reasons are that I believe there are stocks trading cheaply even though the market as a whole is not and the odds still favor more upside.

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