The chart shows that the current consolidation could end up breaking either way.
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Note that there are a lot of traders who have been buying stocks on the basis of now very popular and well known "Sell In May and Go Away" seasonality principle. They're expecting another rally to carry into April.
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Given the USFed $85B/m bond purchases it would be fair to assume that there's plenty of cash available to be lent out for stock market speculation at low rates of interest. Speculators will present stocks, PMs, bonds, property, etc as collateral, so its possible for markets to deflate (unwind) pretty quickly in the advent of a prolonged sharp downturn. As rising markets inflate the value of collateral, additional money can be borrowed for speculation leading to a self perpetuating loop.
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The Long Term Capital Management (LTCM) collapse of 1998 attests to the propensity of banks to lend out large sums money for speculation. When the Russian govt defaulted in 1998, some of LTCM's collateral was severely impaired. The ensuing bailout of LTCM and its investors is an excellent case study of crony capitalism and the banks (including CBs) reckless disregard for systemic risk. At the time the Financial Times made reference the ease at which LTCM was able to borrow money from the banks: "LTCM was able to borrow such large sums of money by operating a merry-go-round: assets were used as collateral to borrow money with which more assets were bought which were then used as further collateral to borrow more money and so on.". The US financial authorities and the financial institutions involved in the bailout were criticized for practising crony capitalism in bailing out not only their own institutions but also their directors, staff and friends who had personally invested in LTCM including Wall Street's finest.
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Fast forward to today, LTCM's creditor institutions were relatively easy to bailout, however Italy's are a different ball game altogether for the CBs.
To resolve the politcal impasse resulting from the recent elections, the ECB may be forced to directly monetise Italian debt and also that of the other debt stressed nations of the EZ. If it does this, it's uncertain whether it'll boost European investors allocation to PMs as a long term inflation hedge. To date investors have been favouring dividend yeiding German large cap stocks as both an inflation hedge and a safe haven from Lira, Peseta, Drachma, etc redenominations.
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Ther appears to be some complacency amoung investors concerning the ongoing European debt crisis. I think investors may be taking the view that the CB printing presses will be made to work overtime before any institution or nation state is allowed to default on its debts. All bad debt must be made good. It's important to note that the ECB and EU cannot prevent a future Italian govt from deciding to exit the Euro and thus defaulting on its Euro debt obligations in the process. Italian debt that is redenominated in Lira will cause massive losses to bond holders.