Although there are currently many reasons to be cautious on the long side, the Fed has turned up the liquidity spigot to wide open over the past couple of weeks.
Here is an update of the NY Fed temporary operations data; the mechanics of the data is described in previous threads:
Over the past few years, Fed liquidity pumping over a two week period has only been higher following 9-11 and in late October 2004. Typically, liquidity infusions of this magnitude results in some of this money finding its way into equities.
Over recent weeks, the Fed has also been relaxing the effective interest rate on funds loaned to member banks, with the average rate actually falling below the 3.25% target rate for awhile. The past couple of days, the effective overnight rate has exceeded the target rate, likely beginning to telegraph the Fed intends to raise the target rate another 25 basis points later in the month.
When this indicator rises above zero (effective rate below target rate) as it recently did, equity prices often benefit.
As stated earlier, there are several warning flags of late advising caution on the long side, but the Fed is trying its best to offset some of those negatives with liquidity infusions into the system.