Speculation Frenzy in China and Solar

It has been astounding to see 50-150%+ gains in a week in almost anything China. Stock after stock that is $3 a week ago is now $10. I had not even heard of most of these names as they are no name companies who have gone nowhere for months, but now just due to the fact they have "China" in the name they are suddenly worth 200% more... in a week.

Speculative frenzy at it's best. While I am a big bull in the long term China story, right now the 'market' behavior is reminiscent of dot.com days when companies literally changed their company name to include .com at the end - and got rewarded with 30% push the next day in their market value. Silly things like that - and this current behavior is the exact same. Today a stock having to do with China that is facing delisting and multiple lawsuits is up 30%, etc. Just throw a dart, and if the word China is in the name or its related to China it's apparently worth double what it was last Friday.

One sector I do know is solar, and many of the players are Chinese. What I remember about speculative excess in the late 90s/00 was these things would come and go in waves. Each wave generally started with the well known names, transfer down to middle of the pack names, and then near the tail end of the move the worst garbage stocks would rally enormously. Right now in the solar sector you are seeing yesterday and today the companies with the worst operations making huge moves. Obviously this fund doesn't own those names, but I do watch the entire group. At this point my sense (if patterns repeat themselves) that the move in this speculation is closer to the end than the beginning - again the reason being the worst of the worst are not being carried away in the speculative fever.

I don't know if it's me being tired or the market is tired, but I just wonder what is left to run up? Do we go back to the stocks that were up 50% on Friday but not Monday and Tuesday and now reinflate them another 50% from here? To me this is a bit of an unhealthy market, breadth (aside from today AM) is weak, speculation is mostly in the no name small caps in 2 sectors: China or solar, and major parts of the market have little bidding. The sectors that are in favor are up massively in 5 weeks. All this in a constant stream of pretty bearish news for the US.

On the flip side you have performance chasing funds who need to get long or risk getting behind the indexes, and a belief the world banks won't let anything bad happen to us. If one were to tell you last May that Countrywide Financial would be below $20, the investment banks would be down 20-35%, housing would be in total disarray and major retailers are seeing significant slowdowns, would anyone think the major indexes would be at/near all time highs? It is just hard to get enthused about this market, although it plods along seemingly ignoring everything and saying the Fed can take us out of this.

With the unemployment report I believe coming out a week from Friday and earnings announcements set to come out in October, I just can't get off this cautious view. I continue buying specific names with a plugged nose, but don't see me pulling in these short ETFs or lowering the cash position significantly until I see how the market absorbs what I perceive to be a lot of domestic companies giving lower guidance ala Lowes. If the market can shake all that off and say "none of it matters", then I suppose it is all priced in. Just hard to believe of the surface that it's that simplistic.

Long caution.