Added on 4/1/11 - and is not an April Fool's joke, this happens to be the first Friday of the month and so it is employment report day
Wall Street divorced from reality
The Wall Street traders are looking at headline unemployment numbers, in recent months, that are misleading and they are bidding the stock market up in response, while the average person on the street is more concerned with gas prices and home prices. Gas prices are now high and still going up and home prices are going down (both not good). Home prices will continue to go down - and gas prices may well continue to go up, at the rate things are going in the world. I think that will eventually determine the stock market and economic trend (down) - because I think this overall downturn (which started in 2008) will be determined from the bottom up, as I have been saying from the beginning. In other words, in the end, the American consumer will cut (possibly way) down on their spending again - because of higher costs and/or a sense of lower net worth - and that will result in a big problem for an economy that is 2/3 dependent on consumer spending. The reason why people will have a lower sense of net worth is because in America, well over 50% of all households have purchased their home, and the market value of that residence is falling in too many places (the majority of places, actually). This is a problem because in most cases, that residence is the household's primary asset.
As for stocks relative to the average person, I think that things changed somewhat once mutual funds became a mass-scale phenomenon in recent decades. Once the majority of people started investing through mutual funds (this did not even happen in the late 1920's, the Roaring '20's, when only a minority of people invested in the stock market and mutual funds were called investment trusts), the traders of the mutual funds became more important for the stock market than the people investing in them. That does not mean that the stock market is not still a barometer of mass social mood in the big picture, per Elliott waves - it is - but I think it does mean that on smaller time scales, the Wall Street traders can temporarily be more important, due to their optimism driving the stock market up more, than the mass social mood on the street, especially since these days the traders often seem totally divorced from what is going on on Main Street. People still react positively when the stock market goes up near-term - but it is not them driving it up, it is the Wall Street traders driving it up, and if the stock market is going up slowly, like lately, and gas prices are high and going up a lot and home prices are still falling, I suspect the average person on the street is going to be reacting more to high and rising gas prices and falling home prices than to the rising stock market when making their spending decisions.
But the people will also react accordingly, cutting back on their spending, when the Wall Street traders finally panic and sell the stock market back down, as happened in the fall of 2008.