There's a slow meltup going on

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

Wake up! There's a slow meltup going on.

I know, another snoozefest. Low volume, the CBOE Volatility Index at 13 and change, near the lowest level of the year.

But look around you. Earnings season has begun, but instead of falling apart because of the negative earnings environment, the S&P has rallied 1.25 percent since Alcoa reported earnings after the close last Wednesday.

Right now:

1) The S&P 500 is at its highest level since early March, and only a few points from its historic closing high of 2,117.39 on March 2;

2) The Russell 2000 is at an historic high;

3) The S&P Midcap is also poised to surpass its old historic high of 1,539.61 on March 20

Oh sure, we've had several periods where there's been a few sharp sell off for an hour or so in the last few weeks, but it always bounces back.

As for earnings, the dreaded season is upon us. Bank of America was light on revenues, but it's only down fractionally. Charles Schwab talked about slower trading activity, but earnings were in-line, it's up fractionally. Delta talked about the problem of the strong dollar as revenues were a bit light, but it's up nearly two percent.

In other words, earnings are coming in-line with reduced expectations, and the market is shrugging them off.

Overbought: international and energy. One other thought: the action has been in global markets...that's where the money has been going. Huge inflows in China and Emerging Markets, and Europe.

But these are also dramatically overbought. Look at these countries year to date:

China (Shanghai) up 26%

Germany up 24%

Spain up 15%

Brazil up 9%

Heck, even BRAZIL is up almost double digits, compared to two percent for the S&P 500!

You really think there is a lot more room there?

Finally, here's the issue of the moment: what to do with the oil breakout? Much of the gains today are in energy, as oil (West Texas Intermediate) breaks to a new high for the year. Big Energy names like Halliburton, Anadarko Petroleum and Cabot Oil & Gas are up two to three percent again.

The problem is, all these stocks have been on a tear since oil bottomed in mid-March.

Bespoke, in a note to clients today, noted the double-edged sword: energy has broken the downtrend, but all the leadership stocks—including those above—are overbought, in many cases VERY overbought.

Bespoke's advice: "For names that you're interested in, wait for a cool-down period sometime in the next week or so, and then pounce on the long side."