Todd Harrison: Will stocks be sold on earnings news?

I offered in December that a window of upside opportunity existed where we could see the stock market lift 8% to 10% as we entered the new year. As of Thursday, the S&P had rallied 8% as Europe improved on the margin and fund managers were caught off-guard and under-invested.

Now, the fun starts. With the earnings season upon us, we'll get the 411 from corporate America as they share their fare for all who care. As equities are a forward-looking discounting mechanism, the fundamental data points will have to sufficiently impress investors, or stocks will once again face their wrath.

A few points of parliamentary procedure as we ready for the earnings avalanche:

-- Overbought conditions can be alleviated through time or price, and the longer the market holds tight, the more viable an upside resolution becomes - perhaps one big enough to push the S&P to 1,360 points (another 5%).

-- The bears will say that the path of maximum frustration dictates a semblance of directional comfort before markets reverse, and we're approaching that mindset now.

-- The bulls will argue that as long as Europe doesn't implode, the market will work higher as that risk is removed from the forward equation.

-- Given the run into earnings, the door is open for those looking to sell the news. Insofar as that's likely, in my view, I plan on managing risk accordingly, as shared in real-time each day on Minyanville.com.

To be sure, financial markets have been hazardous for a long time. In fact, last decade was the single worst 10-year stretch ever. Investors, once bitten and twice shy, are past the point of genteel apathy; they're pissed, and social mood continues to deteriorate with each passing day.

There is, however, a brighter side to our current ride, and that's the notion that in order to get through this, we have to go through it - and we're going through it now. I won't sugarcoat the situation: It's nasty out there. But the greatest opportunities are born of the most profound obstacles, and generational opportunities will present themselves for those who proactively prepare.