BULLISH AND BEARISH ARGUMENTS ON THE STATE OF THE MARKETS:

BULLISH:

1) Financials have been strong and have been leading the market as of late.
2) We are still in a daily uptrend, although in the backdrop of a larger bear market.
3) Market is shrugging off bad news and continuing higher - i.e., s&p downgrade of the eurozone
4) Macro data improving slowly - jobless claims, employment situation

BEARISH:

1) Broader markets still in a larger bear market and are at critical retracement levels (78.6% on monthly)
2) $TED spread has been rising since the August drop with only a minor decline in January. (TED spread is an indicator of perceived credit risk in the general economy.[1] This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, that is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing.
3) 10 year yield which has generally been following the broader equity market in same direction has been diverging. In other words, in the recent weeks while markets have moved higher, the 10 year yield has not. (The bond market is not believing this rally).
4) The CBOE put/call ratio is at .74 (quite low). This is a contrarian indicator.
5) The investment sentiment numbers have posted a 2 week consecutive highly bullish bias (not seen in 6 years). This is also a contrarian indicator.
My viewpoint remains unchanged. I believe we have the potential for a quick rally to 1307 area this week and that's it. We will see panic setting in through end of this month and into February of a potential Greek default. That will take center stage for the next few weeks.