Last week I mentioned that a pullback was due, and indeed we’ve seen some market weakness this week. The 50-day simple moving average is trying to support the large, mid, and small caps at this point, but the Dow Industrials and MSCI Emerging Markets are holding up better as they are supported by their 20-day. Among the major sectors, Healthcare has actually displayed strength this week despite overall market weakness.

Although trading volume remains anemic, with NYSE volume below 900 million today, equity bulls continue to run the show as the global “wall of worry” seems to suit them just fine, thank you.

Bulls continue to shake off global challenges to keep the market in rally mode heading into the end of the first quarter, led by powerhouse sectors Basic Materials and Energy as well as Healthcare and upstart Telecom. In fact, the S&P 500 is on track to achieve its largest first quarter return since 1998. The SPY closed today at 132.77, up 5.6% on the quarter with one more trading day to go.

Market bulls found support at the right time and pulled another rabbit out of their hat. It’s good to have friends in high places, as the Fed’s POMO money continues to flow, including another $6+ billion today for the purchase of Treasuries (which tends to find its way into equities). Last Wednesday, I suggested that the extreme weakness might have been a selling climax, and it turns out that is was – at least for the short term.

Last week I wrote about the market’s impressive run off the March 2009 V-bottom. But since then, the bottom has fallen out, led by the Technology sector. Those of you who read this column regularly know that I have been opining that the rally has been pretty much manufactured by the Fed and their quantitative easing initiatives, but more recently the signs of economic recovery have been taking shape without much inflation.

Today marks the two-year anniversary of the V-bottom that launched an impressive bull market. Since then, the SPY large cap is up about 95%, while MDY mid cap and IWM small cap are up about 135%. Leading sectors include Basic Materials, Industrials, and Financials, which are each up at least 150%. Pretty impressive.

This month marks the first time since July 1 that the first trading day of the month wasn’t an up day. That’s 8 months in a row of money pouring in on the first trading day. Furthermore, recall that July 1 marked a low for the SPY at 101.13 that ended a 2-month correction to the 13-month rally off the March 2009 V-bottom, and launched a new 8-month rally. Is the fun over now?

It’s a nice change of pace to talk about something other than the stock market’s persistent uptrend getting more and more overbought. This week has brought some excitement indeed. As I said the last two weeks, it will pay to be cautious with long positions because such a market can reverse and fall quite quickly.

Bulls on Wall Street continue to call the shots and have their way. Bears who dare try to venture out of hibernation are smacked back into the cave before they’ve barely seen the light of day. The unshakably bullish action and buy-the-dip mentality has many market observers wondering if it can be sustained, given the struggling economy, moribund housing market, rising food and energy prices, skyrocketing deficit, and persistent unemployment.

The market reeked of late-day manipulation today as a last-minute push managed to get the Dow back into positive territory, but the S&P500 and Nasdaq couldn’t quite make it. The bulls have staked out their claim and won’t allow anyone to spoil their party...and they have powerful friends.