I am of the belief that the current rally is unsustainable. I don't know when a downturn will come, but I suspect it will be somewhat dramatic. I suspect that Fed liquidity is trying to find a decent return and is pushing the markets higher. I think within the next year, the current stimilus will be proven to have failed and new systemic problems will arise. I don't anticipate a true "bottom" until 2011.
That said, this much liquidity will create a bubble SOMEWHERE. I do believe something will rise (probably dramatically in price) as all that liquidity chases return from somewhere. It'll me pretty entertaining to see how it plays out.
I have made my living trading Chinese micro-caps for the last few years, and still like that as an area of focus. Valuation remain very good and growth remains pretty strong. They are nice, tradeable positions with a lot of volatility. The space works perfectly for the limited amount of money that I want to invest. Currently, I hold CEU, JGBO, LTUS and PUDC. That said, I cycle through these pretty quickly and have held a wide variety of different stocks in that sector. I do like those 4 though, and only CEU is on a major exchange, so I look forward to JGBO's uplisting and PUDC uplisting after a reverse split. LTUS has a trailing P/E of under 2 and some nice growth prospects in its pipeline, so I don't mind holding that for years.
I remain heavily overweighted in cash for the moment, though I am consider various options (outside of equity) as a home for it.