The strength being demonstrated by the markets are undeniable. Defying some of the most overbought conditions I've ever seen, the market refuses to give in. Also, money continues to flow back into other riskier areas such as high yield corporates and beaten down bank loan funds (see EABLX). Commodities showing strength is also a positive for the bulls.

This is exactly what should happen right now for the 1929-1930 comparison to continue. Remember in 1929 stocks fell 50% into November before rallying 50% into April 1930. It was then that the new economic reality set in and the worst of the declines began.

Right now everyone believes that the economy is going to recover in the second half of the year. As a result it's natural for the market to rally 6-9 months before the expected recovery shows up. That's why, right now, bad news doesn't matter. It's rear view mirror stuff. The market's advancing on the faith of a recovery later this year. Nothing else matters. But what if doesn't show up?

By the spring it will become clearer if the economy is actually going to rebound in 2009. If it becomes obvious that no recovery is in sight, risk assets will begin to slide again. That's what I believe will happen. 

So for now, risk is back in vogue. Every dip will be bought and euphoria will soon reign supreme. If I'm right, we'll see bullishness perhaps like we never have before. In some ways it's already started.  

My initial target for the S&P is 1008. I'll start with that number tonight. That's not as much as the 29-30 rally accomplished but lets start there. Also keep in mind that a shockingly swift sell off could show up at anytime in here. It should be a buying opportunity if it does. It'll still take a break of 850 for me to reevaluate my scenario.