We have always maintained that the best way to understand the mood of any stock market is to look at the behaviour of small caps. Small caps have a wonderful tendency to trend with relatively little volatility which makes depicting the true trend of the market considerably easier. Furthermore, due to their relative lack of liquidity their action forewarns or leads the behaviour of large cap indices.
We would like to draw your attention to one of the hottest equity markets in the world, Moscow. Look at the behaviour of the MICEX Small Cap index. It is at a multi-week high and gives every indication that it wants to move higher. Of course it is somewhat difficult to invest in Russian small caps themselves but for the average investor the ETF RSX will suffice.
Disclosure: Long EEM, RSX