Interpreting the market is pretty easy. You just look at the recent price action and extract the rationale behind those moves.
Last year it was telling you doom, gloom and utter destruction.
This year (at least since early March) it is telling you cyclical recovery (discretionary, IT, emerging markets), inflation (materials, energy, gold), funding concerns (weak dollar, rising rates), and skepticism (short covering and sidelined cash).
The trick, as always, is not getting blindsided by a reversal. And that is problematic because the market has already staged an historic rally, and it is unclear whether the cyclical recovery/inflation thesis will turn out true. Of course, by the time the data comes out, the market will be somewhere else (I'm just not sure where).
P.S. By rallying more than 40% straight up from the lows (with perhaps more to come), the market is telling you that it made a mistake last year (or maybe more precisely at the beginning of this year).
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