1. The economic data points to be released this week I believe to be particularly favorable. I expect significant positive surprises in retail sales on Tuesday, industrial production (March) and the NY PMI on Wednesday, and U of M consumer sentiment on Friday.

2. I believe the banks will likely provide better than expected reports and constructive guidance.

3. Trim Tabs data are showing major inflows into mutual funds for the first time in a long time. For reasons outlined in prior buzzes, institutional managers will have to put this cash to work immediately. They cannot afford to speculate on a pull-back. These inflows that almost certainly have accelerated since the latest Trim Tabs report could provide major fuel for the rally this week.

4. Cash levels remain at or near all time lows amongst individuals and institutions. Declining VIX levels and other indicators of risk aversion, combined with the above mutual fund flow data suggest that a potentially powerful trend of mutual fund inflows is getting started. If this is the case, we are only in the first inning of such a move.

5. To support the above hypothesis of a trend towards mutual fund inflows, my research suggests that the vast majority of the cash raising by the public and by institutions occurred while the S&P was between 800 and 900. That is where we are right now. I believe this has potentially enormous psychological significance. As people see that the market and stocks are roughly at the levels they were when they sold, they will feel a strong tinge of anxiety to get back in so as to not miss the rally and (especially) to make up some of their 2008 losses. Also, do not underestimate the power of the urge to "not fall behind the Jones." Right now, people are starting to look over their shoulder and wonder whether the Jones are getting back in. If they are, they sure as heck don't want to fall behind. And if they aren't, well, this might be a chance to get a leg up on them!

In sum, buyers are here and higher. Also, I believe that buyers are lower on any dip as many have been hoping for one.

However, I also feel quite strongly that a very sharp 10% correction will occur within the next 10 trading days. I believe that it is impossible that we can get out of the next 10 days of earnings reports without some major disappointments. The question in my mind is: Will it happen from around current levels of around 850 on the S&P 500 or will it happen from a level above 900?

One final thought to throw into the mix: Note that in terms of the solar cycle, we are 180 degrees from the violent sideways consolidation that transpired from mid October through mid March of 2008. For various reasons related to the effect of the seasons on human psychology and the particular psychological set up coming into this spring, I believe that the move into spring this year could be very important from a psychology/mood perspective. I believe that there is incipient evidence of an inverse symmetry developing between the manic depressive sentiment swing that developed last fall and a potential inverse mood shift this spring.

I point out this potential inverse symmetry because the wild oscillations described above between mid-October and mid-November occurred after the market put in a short term bottom after the dramatic and steady declines of September through mid-October. Could the coming one month period, coming on the heels of a dramatic and steady uptrend, provide a mirror image of events from mid-October through mid-November of 2008? The calendar cycle hypothesis harmonizes with my completely independent fundamental and technical view.

Thus, the question remains: Will we enter the hypothesized period of wild oscillation from the current level or a higher level? To the reasons to favor the latter interpretation, I offer one more: resolution of the inverse head and shoulders formation to the upside in the S&P 500. This is a better technical set up for the scenario of wild oscillation described above, I believe.

Conclusion: My base case is for a very positive week this week. I would then expect a sharp correction of about 10% at some point next week. However, I am prepared to reverse my trading stance for a sharp short term corrective movement at any moment depending on the earnings and economic data flow this week. Instruments that can be used to capitalize on the various scenarios outlined: SPY, SH, SSO, SDS, QQQQ, PSQ, QLD, QID, UYG, SKF, FAS, FAZ.