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.

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.