What drive the recent market rally and do we expect a huge pullback?

Finally got some time to update my market expectation on recent market rally after a busy week. Today we saw all the indexes dip into light negative territories with low volume. It is the light pause after 5 consecutive rally to market new high since its breakout on May 6th. The recent market internals really shock me as I have discussed early last week that the P/E multiple should not even remain the same level as it was before 2008. Even the recent economic outlook has improved, the investment context within the world was not optimistic from my perspective. The export data from China, the eye-catching emerging market, was inflated as we all know some of the exports did not even leave the tax harbor, rather acting as a way for some domestic companies to ask for state refund. The slowing outlook on China economy, together with all of the QE monetary policies followed by other central banks, did not indicate any potential real growth. So I argued that the valuation is high based on D/P yield trajectory model.
However, money, especially money managed by most active funds, has to flight somewhere to seat. You might say they can go to bond market. Well, with negative real interest rate implied by TIPS, that is not wise to go. What about commodity? Not all funds can access to those assets. The commodity market not only links to QE but also connect to economic outlook. That is why recent commodity market tumbles even after FED announced the potential additional stimulus.
The group rotation brought technology and materials stocks back to yesterday’s leadership. Industrial metals rose following a wider-than-expected trade surplus. Energy, utilities and consumer discretionary stocks were flat to lower. All of these suggest investors require a lower market premium for their investment. Is this the whole pictures right now? You keep wondering why market keeps going up without a pause under low volume? This leads us to discuss next meaningful question, do we expect a huge pullback soon?
After analyzing the earning reports by those big institutions, such as, JP Morgan , Morgan Stanley, and BOA, I tend to update the picture to a more realistic one - we may not see a huge pull back in May. Let's take a look at too-big-to-fail banks' reports. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) had perfect trading records in the first quarter, making money every day of the period as Morgan Stanley posted losses in eight sessions and Goldman Sachs Group Inc. in two. One daily gain at JPMorgan exceeded $200 million as the biggest U.S. bank by assets recovered from last year’s London Whale derivatives loss, the New York-based company said yesterday in a regulatory filing. Bank of America, the second-largest lender, generated more than $25 million of revenue on 97 percent of trading days, compared with 76 percent at Morgan Stanley, the firms said in separate filings. Goldman Sachs, which generated about half its revenue from trading last quarter, said its team made more than $100 million on 17 days.
You will ask where those trading revenue come from, the tiny notes said a big portion of that came from them selling insurance to clients. Pause here, what "insurance" are they talking about? yes, in financial industry, the "insurance" is the put option. Now when those big banks are all writing the put options, do you expect big institutions such as GS to bet huge market downward slope? Remember, they are too big to fail banks, which have access to capital market with huge financial resource to gauge market internal. Therefore, I will not bet against them, at least not in the following two weeks.
I will keep eyes on the market and update the market review whenever I see something new.