Cash flush investors who have been waiting for a buying opportunity must be feeling like the guy standing outside the sold-out concert looking for someone willing to sell him a ticket. Stocks just won’t pull back much, despite a huge wall of worry that one might expect would put some quicksand under the bulls’ feet.

The dreaded sequestration went into effect on Friday, and the market continues to be nervous about how it will play out.  Market sentiment seems to be that Congress will do little or nothing this month as the first effects of the budget have been relatively mild, like the cancelation of air shows by the U.S. Navy Blue Angels and the U.S. Air Force Thunderbirds. That attitude is likely to change as sequestration cuts begin to affect more sensitive areas like school funding and Medicare. The bottom line is, either Congress and the President will start learning how to play together for the good of the country, or the automatic budget cuts will take effect which will send ripples if not major quakes through the entire economy.

It has been an unusual week to say the least. The market has declined a tad on the indecisive Italian election and the still uncertain outcome of the sequestration issues despite a robustly positive series of economic news and a very positive testimony from Chairman Bernanke who emphasized that the stimulus would continue as previously projected until employment and economic growth has improved.  

For most of 2013 thus far, the market has been on a steady rise without volatility within a narrow channel. Bulls have been looking to recruit reinforcements for their assault on the all-time highs on the S&P 500 large caps and Dow Jones blue chips, after already taking out the all-time highs on the Russell 2000 small caps and S&P 400 mid caps.

From the Fed, from Congress and President, and from Europe for starters. Chairman Bernanke may give us the former as he testifies on Tuesday and Wednesday this week.  Congress must act by Friday over the sequestration issues.  And Italy could’ve helped a bit today if its election resulted in a more stable government, although that does appear to be happening.

Last week, the Dow and S&P 500 large caps hit five-year highs, the Russell 2000 small caps and the S&P 400 mid-caps made all-time highs, and the Nasdaq recorded a 12-year closing high. But some investors are evidently showing concern that it has all come too far too fast.

After a long weekend, the market got a decent start to the new week from favorable European economic reports this morning and our own political “calm before the storm.” Last week was frankly more upbeat than many expected as the market continued its advance to new highs, albeit slowly. And it was a quiet one ahead of the President’s Day weekend with a less partisan State of The Union speech from the President.

Stocks are inching ever forward, but investors are showing plenty of indecisiveness along the way. They might be suffering from acrophobia—fear of heights. Their trepidation is reflected not only in the ongoing price consolidation as the major market averages struggle at long-term highs, but also in the extremely low trading volume.

Regardless of what I say, the market clearly wants a plan from the President and Congress so that sequestration can be avoided on March 1, 18 days from now.

Our forward-looking SectorCast predicts things won’t go well—for the first time in the history of the model, the top three sectors, Consumer Cyclicals, Non-Cyclicals, and Technology, are all flight-to-safety. Last week, the market eked out a slight gain. While all style/caps were positive, only two sectors were positive on a cap-weighted basis: Consumer Cyclicals and Technology. The rest were mostly marginally negative.

Well, Punxsutawney Phil didn’t see his shadow on Saturday, so the weather forecast is positive. However, investors having their own version of Groundhog Day at Dow 14,000 and S&P500 1500 are still trying to decide whether to retreat to safety in anticipation of a severe market pullback. Weakness on Tuesday seemed like the start of a correction, but alas the bulls would have none of that.