The market has been relentlessly higher for nearly two full months. Such a long rally without a decisive pause always ends in mayhem. Meanwhile, do you think Facebook is over pricing itself?

While I expect a short-term pullback, I'm not anticipating a large top to form this week. It could, but I don't expect it to occur.

While short-lived, yesterday's pullback had purpose. Along with the sideways fade over the past week most of the major indices were able to work off an overbought condition.

These three banks have a long history of providing market-beating yields and positive returns on investment. 

Despite the fact that the six major U.S. banks have been on the rise for nearly four months now, their stocks remain risky long-term buys.

Earnings season hits full stride this week, and it could be a very critical week for the bulls.

The difference between the two earnings reports came down to one area: investment banking.

The market recorded another gain yesterday as the indices continued to consolidate after the big open to start the week.

JP Morgan Chase's (NYSE: JPM) fourth-quarter earnings fell 23% from last year, but the real test for the big banks comes next week.

The increase in volume was excellent to see yesterday, and that increase in volume added further conviction to the bullish move higher past 1280 resistance.

I argue in favor of a bullish advance past 1301 resistance and this week could very well be the start of that move. 

Chairman of Goldman Sachs (NYSE:GS) Asset Management Jim O'Neill discusses what he calls the January 5-Day Rule...

If you're looking for yet another reason to own physical gold, look no further than the unbelievable situation that continues to unravel with the MF Global debacle.

The euro has fallen sharply lower by 3% this week, which has corresponded to a similar rise in the dollar. The rise from the dollar brought havoc to the commodities and stock market alike.

While investors should be wary of the bank sector as a whole, there is one bank that I believe will rise above the rest.

If two of these three trends don't take place, neither will a market rally.
 

All major U.S. indices were down by more than 2% on the session, and once again, financials, which are heavily exposed to a European debt crisis, took the largest loses.

The market concluded its fourth positive week in a row with another strong performance from financials.

The market and the euro both tanked following the news out of Greece last week.

Investors had expected the worst from the banks, which is why the financial index was down 30% since May. The market will not be able to break 1250 resistance and rally higher without the bank stocks.

Every bank stock was higher, and most rose twice as much as the average stock from other sectors.

Bank of America (NYSE: BAC) missed earnings estimates badly, and tech behemoth IBM (NYSE: IBM) came in light on sales.

Big bank stocks were hit hard. The decline followed a bland earnings report from big banking leader, JPMorgan (NYSE: JPM), which promptly resulted in similar declines to big bank competitors: Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC).

While I don't view Greece as an issue, a slowdown in Europe would be a big deal.

With the stock market decline over the past two months, this earnings season promises to hold a few extra surprises.

On Tuesday the Federal Open Market Committee (FOMC) minutes from last month will be released and third quarter earnings season officially begins with Alcoa (NYSE: AA).

Big banks don’t have much of a reputation at the moment. Ok, that’s being kind. People HATE big banks – or at least they have since the infamous subprime mortgage loan crisis in late 2008 and early 2009.

Earnings season got underway with an underwhelming start by Alcoa (NYSE:AA). The company beat on revenues, but missed pretty badly on EPS due to rising costs and weaker prices for aluminum.

Economists have been extremely inconsistent with their economic projections over the past few months, as their views and outlooks seem to be swayed by their emotional response to the economy and stock market.

Today, I would like the bulls to retest 1175 resistance and stay above 1131 support. Obviously, staying above 1155 and rallying past 1175 would be better, but SPX has recovered 6.4% from its low; buyers should be happy with that turn.

The market pulled back Wednesday, a move we expected following Tuesday’s price action. The big tip off that a pullback was near came from the underperformance in bank stocks on Tuesday.

The banks led the indices higher on Monday following bailout rumors in Europe. In fact, most bank stocks were up over 3% on the session. But those same bank stocks, like MS BAC, C, and JPM could not hold those gains on Tuesday despite a huge rally in the other indices. 

There's a rumor making the rounds that EU will forgive 50% of Greek debt and increase the ESFS bailout fund to 2 trillion euros.

The market seems to be expecting Bernanke to do something. Perhaps he will announce the "twist" selling out of short-term Treasuries and buying the long ones.

Forgive me if I am forced to delve into Europe and its debt again today.

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The market popped again yesterday. The gains were larger on Monday, but it was still a strong showing by the bulls to rally the U.S. indices for a second straight day.

If (when) Greek defaults, European banks will suffer losses to their capital base. They may have to raise cash with secondary offerings and perhaps sell assets., and U.S. money market funds that own European bank debt will likely have to do some maneuvering.

The bigger issue for Europe is Italy and Spain. These two are much bigger than Greece.

The market was slammed yet another time yesterday. Although unlike Thursday and Friday, the indices recovered into the close.

Once again financials led the charge lower and the big banks like JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) were down 3%. Energy and technology components were also hurt and stocks like Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) were down 1% and Exxon Mobil (NYSE:XOM), Apache (NYSE:APA), Continental Resources (NYSE:CLR), which we're short, and Halliburton (NYSE:HAL) were down 2%.

The Lisbon Treaty was signed by EU member nations in 2007, as a sort of make-up treaty to correct some of the mistakes from previous EU treaties. Turns out, there's a "no bailout" clause in the Lisbon Treaty. Who knew?

And by the time you read this edition of the Daily Profit, Germany's Constitutional Court will have voted as to whether the EU's bailout fund for Greece et al violates Germany's democratic constitution.

The market was slammed again on Friday. Volume was light, due to the holiday, but the indices slipped by over 2%. Once again financials led the charge lower and the big banks like JPM, WFC, GS and C were down nearly 5% while BAC lost 8.3%. And the worst of the decline is not over.

The FHFA sent lawsuits to 17 banks. And the amount that was sought is in the billions of dollars. But the fear on the street is that if banks pay one settlement for a fraudulent mortgage, hundreds more cases will follow. And with $5 trillion in questionable loans, the banks are on the hook for a large sum of cash.

The market salvaged a gain yesterday, but it was an unenthusiastic win for bulls. Volume was up, but that was about the only good thing I could say about yesterday's price activity.

Banks and oil stocks sank and the rest of the market muddled through the afternoon in an uneventful session.

In the morning, pre-market, the indices were poised to record a huge (positive) day. And the indices, along with just about every stock (up to down volume 15 to 1) was up in the morning.

Growth forecasts for the U.S. are being drastically cut after yesterday's disastrous Philadelphia Fed manufacturing survey. Economists predicted slight expansion, instead we got the worst reading since March of 2009.

JP Morgan (NYSE:JPM), who just cut its GDP forecasts, cut them again. And the cuts are big. From 2.5% to 1% in the 4th quarter and from 1.5% to 0.5% in the 1st quarter of 2012.

Citi (NYSE:C) was less dramatic, cutting 2012 growth from 2.7% to 2.1%. Citi also cut earnings estimates for the S&P 500 by around 4%.

The market fell by nearly 1% yesterday. Volume stayed high, but was nowhere even close to the levels of last week. And in sharp contrast to Monday's session, energy and bank stocks were murdered.

The big banks felt the worst the bears could offer yesterday as BAC (-4%), JPM (-2%) and C (-4%) led the charge lower in the financial sector.

More notable than the drop in big banks or big oil stocks was the inability of the bulls to maintain SPX 1197.

The market was obliterated again on Wednesday as the bulls lost nearly all of their hard earned gains from Tuesday. Volume was jacked once again as investors sprinted away from the big banks and financials, which led the indices lower.

The big bank stocks like BAC, C and GS had it much worse and were down 10%, while WFC, BAC and Warren Buffett's Berkshire Hathaway were down 7%.

Yesterday was a critical loss for the bulls. Going into Wednesday every index had form a reversal pattern. And each of those reversal patterns were on high volume. The SPX, for example, formed a bullish harami that took the index back up to 1175 resistance.