Today is the fifth trading day of the rally. Longtime readers know that I believe it takes about ten trading days before a strong rally gets exhausted. That does not mean we will not have pullbacks along the way. I would not chase this rally if we have another big up day today, as I would be very surprised not to see a pullback or at least some consolidation early next week.
Sentiment has vastly improved from where it was a week ago. That said, we are not seeing giddiness yet. Market participants have been burned so bad recently chasing moves that I suspect they are distrustful. If we do see a pullback early next week followed by a rally later in the week I suspect we will see some giddiness right around the time the market gets overbought.
From a fundamental standpoint the news from Europe is improving. The ECB has been active in the sovereign debt market for three days in a row. The rescues being reported involve the ECB and aren't immediately being shot down.