From the perspective of the SP500, I am cautious due to the low level of the VIX (in relation to the rally's trading dynamic).
Another reason I am expecting a consolidation, at least somewhat, is due to the rapid ascent of the treasury yield.
Its current level is resistance.
The above may hold some short-term sentiment perspective, but over the last 9 months or so the only data point that has truly mattered was the Employment Situation. This data point has allowed stocks to trade at higher multiples from December 2011 to April 2012, and has allowed the market to trade at severely depressed multiples from April 2012 to present.
The recent Employment number was pretty good, along with the its respective Jobless Claims. The next Employment number is on Sept 7th. IMO, here are the obvious scenarios:
1. Good numbers - the market will keep rallying as multiples continue to rise. (Even though I sold out of Google 15 points ago, it has no business trading with a multiple below 19-20 in a non-recessionary environment. Similar can be said about a lot of names.)
2. Blah numbers - the market may trade sideways or allow stocks to trade on their own secular growth merits.
3. Shit numbers - compressed multiples will come back.
IMO, the current trend of the August Jobless Claim numbers are suggesting a Blah-to-Good number for August Employment, but leaning towards "Blah". (The good aspect of the August jobless claim numbers is that they are at the bottom range of claims. The statistical lingo of "blah" is that the numbers are not continuing the down trend. :)
Just a side note: With the US economy improving, yield rates rising, US housing firmly improving and Europe removing the threat of a financial crisis, banks are just too cheap. From a market mechanics perspective, recent SEC filings suggest hedgies under own the banks. If the conditions I just mentioned remain in place, at the very least, banks will approach book-value sooner-rather-than-later, with the big boys taking them there.