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Today's Rally: What's Up?

Monday, 18 May 2009 | 4:04 PM ET

Many traders went to bed last night with futures drifting lower and woke up broadsided by a surprising election in India that has pushed up emerging markets.

Traders noting we are seeing a lot of "reluctant" buyers today; that is, many active traders are still lagging behind the March-April rally, so they are buying the dips today.

Bears will - and should - hone in on the extremely light volume, indicating that buying enthusiasm is not as great as the point moves would indicate.

On the Indian elections, everyone agrees it is good news for the markets BUT:

1) Emerging markets are becoming overbought; emerging markets in general are up 60 percent from March, with India up 86 percent since the October bottom.

2) How much room for real reform is there in India, given the economic slowdown and the glacial pace of bureaucratic change there?

Elsewhere, it is the same "good news but..." story:

1) Good news on stock prices today, BUT the market is not cheap: the S&P is now trading at nearly 17 times 2009 earnings, expensive by historic standards....and 2010 is a long way off.

2) Good news on the retail front from Lowe'sand Dillard's, as they beat earnings expectations, BUT they did it on cost cutting and inventory control...this works for now, but without topline growth it will be tough to move the stocks forward.

3) Good news on the May NAHB builder survery, as builders are becoming more optimistic, BUT traffic was unchanged from April...with lower prices, lower mortgage rates and all sorts of incentives we aren't getting more people out kicking the tires?

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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