Bulls have regained their footing and recruited some reinforcements, as the S&P 500 on Wednesday powered right through its 5.5-year intraday high of 1576 on increased trading volume to set a new record of 1589.

This week began on the same negative tone that last week ended on. There were no economic reports today, but an unexpected European problem surfaced as the Constitutional Court in Portugal ruled out a number of austerity measures that the Portuguese administration had implemented, pursuant to the requirements of the ECC, IMF and EC.  This creates a dilemma for both Portugal and the troika. 

Last week, I talked about the impressive strength this year in the Dow Jones Transportation Average, but it since has been hit by investors’ renewed worries about global economic growth and financial stability. Its fall has been led by weakness in the airlines.

With European markets closed for Easter on Monday and Asia soured by poor economic reports from both China and Japan, it was up to the domestic ISM report and the Construction Spending reports to give the market a boost.

The Dow Jones Transportation Index is up an impressive +16.7% year-to-date through Wednesday, as it runs interference for the broader Dow Industrials (up +10.8%) and tries to prod the bulls ahead.

The week started out well as insured depositors were spared in Cyprus, and that resonated well with investors.  Furthermore, last week’s domestic economic data was quite positive especially for housing.  The Philadelphia Fed Survey was much better than expected; Initial Jobless Claims remained in the low 300K area; and LEI were as expected.

Well, you gotta hand it to the bears; they are pulling out all stops in their effort to derail the bull train, just as the S&P 500 tries to eclipse its all-time high. This time they trotted out the tiny republic of Cyprus (pop. 1.1 million) and its battle with the EU over the terms of its financial bailout. Steal a big chunk of depositors’ accounts?

This week began on a very ugly note after the IMF, ECB, and EC revealed over the weekend they are requiring Cyprus to levy a tax on its depositors. This, they felt, was needed to raise approximately one half of bailout funds needed by the government to, among other things, shore-up its banks after taking “big hits” to their capital structure from the disastrous fall in Greek bonds held by the Cypriot banks.

I was watching the ABC World News the other evening, and I was struck by the commercials they ran. The target demographic is obviously an older crowd (and since I was watching, I guess that includes me). Advertised products within the short 30-minute newscast addressed a variety of age-related ailments like low-T, erectile dysfunction, overactive bladder, constipation, hemorrhoids, and loose dentures.

After a bullish performance last week, the market began the day a little off but managed to fight its way into increases across the major indices with S&P 500 closing at 1556, just 9 points shy of its record closing high in 2007.