Where Is the Stock Market Headed?

The stock market has been going through an internal tug of war over the past few weeks. One week it looks ready for a substantial pullback as equity prices collapse. A few weeks later it appears to be heading higher as money flows into the market and investors buy risk. So which way is the stock market really headed? To better find out, we need to look at the factors that will shape how the market performs over the next few weeks:

The start of earnings season is upon us and it will be a strong indicator for the direction of the market. A slew of corporate giants are set to report earnings over the next few weeks, which will help investors see how the economy is truly performing. Even more important than the past quarter's earnings will be the outlook for future quarters. Are companies willing to risk increasing earnings estimates and adding more employees to the payroll? Or will companies remain cautious and try to temper Wall Street expectations?

The national debate over the

will have a big impact on market performance. The market has been relatively stable having priced in a debt deal being reached. But if no debt deal is reached, expect a substantial drop in financial markets across the board. The stock and bond markets would both plummet as the United States would no longer be deemed the safest market for investing. Since investor confidence has a big impact on the price of stocks, a lack of trust would lead to an incredibly large selloff that could send the market into a tailspin.

The stock market continues to be impacted by the debt crisis occurring in Greece. Borrowing costs have risen substantially there and investors are concerned about other European countries defaulting on their debts. A number of stress tests have been conducted by regulators over the past week to instill investor confidence. However, these stress tests were discounted because they were not deemed stringent enough to determine what banks are truly at risk of failure. Moreover, there is a lingering concern that many financial instruments issued by foreign governments may be at risk of default if the countries are not recapitalized.

Just when investors thought the Federal Reserve was going to exit the financial markets, Fed Chairman Ben Bernanke signaled that they may start another round of

. If the Fed stays in the market, the

and several other precious metals may be driven to new record highs. That said, continued economic stimulus will further increase the

. The aforementioned events are currently contributing to market flux and will have a substantial impact on investment decisions and, thereby, the market's direction as further information comes to light. Where do you think the stock market is headed?