Does this rally make any sense? Not really. But, as they say, don't fight the tape. On the other hand, we all know too well that the trend is your friend... right up until the point where it isn't. Once the trend turns its back on you, it can become quite the enemy. The trick? Trends try to make sure they can fool as many people as possible. I only bring it up right now to provide the context for a discussion of this market. On the surface things look great, with the S&P 500 as well as the NASDAQ Composite both within easy striking distance of record highs. I just can't help but wonder if this strength is the market's way of luring everyone one, only so it can drop the boom on them at the exact worst time. Take a look at the daily chart of the S&P 500. Today's close of 2187.12 is within sight of the all-time high around 2194. Though not shockingly high, there's a good amount of volume behind the move. The NASDAQ Composite looks about the same. That is, the composite's close of 5333.97 is within reach of its peak near 5343. One more good day could get it over that hump. To see both indices persistently bullish enough to not only overcome a budding pullback but to get them both back on the verge of breaking a record is pretty amazing... perhaps too amazing to trust. To be fair, even if the bears are just yankin' our chain here, that's not to say the indices won't move above both ceilings in question. I suspect they will. As bullish as things have been of late, any move above these two key ceilings would almost certainly lure all the people on the sidelines into the market. That could be the last hurrah though, setting up a firm market for the smart money and institutions to sell their stuff into, leaving the little guy holding the bag, so to speak. Maybe I'm wrong. Maybe stocks are destined to rocket higher now that a pro-business President is on his way in. I have to think the U.S. populous knows there's not a whole lot any incoming President can do to spur growth right away though, and I doubt anybody's really thinking of buying stocks now for what might finally matter six to twelve months from now while the market is so overvalued. We still contend the market's true "tell" here is the VIX, and for the NASDAQ, the VXN. They're both much lower than they were two weeks ago, and both are now resting on key support lines. Both have room to move a little lower, which would be good for the overall market. Neither has demonstrated any willingness to break under those floors though. There's a reason. Thing is, anything other than a wildly bullish breakout might be the best thing possible from here. I like the way John Monroe posed it to Elite Opportunity Pro members today. He explained: "... based on what I'm seeing with the major indices and how they've been behaving over the last several days, the markets have clearly been in a position to scream to new highs, especially since so many short-term retracement levels have been breached to the upside. Yet, they still continue to waffle and grind, so I suspect the major averages will simply continue to grind higher throughout the rest of the year. Believe it or not, what we won't want to see is a runaway freight train because that too could suggest a blow off top. The takeaway here today is we're going to want to continue to see how the dollar behaves, as well as the major indices. Honestly, I think the dollar, when it's all said and done will be the tail that wags the dog. Meaning, should the dollar scream higher on this new breakout, we'll likely see commodities across the board pull back in the process." He's right, perhaps in more ways than he even meant to be. We've been talking about the U.S. dollar for a while, and will update that chart for you below. In the meantime, John's point was - and we completely agree - that investors are going to look to the dollar for a cue on what to do with stocks... and commodities. It may not necessarily make sense, but that won't prevent it from happening. Thing is, if a soaring dollar spooks commodities and in turn spooks stocks, there's a good chance investors will end up creating the very contraction they fear the most. Even if the U.S. dollar does peel back before melting up though, there's no assurance that will stave off a more serious pullback in stocks, which in turn could convince people to start thinking and acting as if an economic lull is taking shape (even if one isn't). Like John acknowledged, a runaway freight train rally may be treated like a blowoff top -- a last hurrah -- even if that's not what it is, hence his reference to the tail wagging the dog. We've been in this kind of environment for a long while now, where stocks are treated like a barometer for the economy even when they aren't. Pacing will be the key. Too much is bad. Too little is bad. We need a Goldilocks rally if it's to last. In any case, here's the chart of the U.S. Dollar Index. It cleared a big-time technical ceiling. That's bad for commodity producers, and bad for oil companies. It's also bad for U.S. multinational companies, which are most of the big ones anymore. The overarching question has now become, what's next for the dollar? Will it continue to rise in step with yields? Will it drop even if yields don't? Will investors figure out just what a burden that strong dollar can be on a bunch of U.S. companies? Our guess right now is, based on all that we can see, stocks will just clip the aforementioned ceilings, the dollar will peel back at least a little, and yields will hold steady (meaning a December rate hike has already been baked in). That'll all be a good thing in the end, however. Better to take your lumps on your terms than the market's terms. Perhaps that's all just wishful thinking though. Maybe we're just afraid if the dollar and stocks go a whole lot higher from here, it'll set up a pullback that's so fast and harsh we'll be unable to stop it. Yeah, it's a situation that's so good, it's bad. We'd much rather be dealing with a case where things are so bad, they're actually good. That's not the hand we were dealt though.... at least not yet. Stay tuned. This is gettin' real interesting, and there's a whole lot of "more to the story" under the surface we all need to keep tabs on.