Right now market participants have to make the difficult decision as to whether the recent rally has "run its course" and may be poised to reverse and trade down in its trading range or "break out" for another "leg up." The market may spend the day "fluttering", undecided between taking a dive and rallying further.
Traders and short-term speculators will be trying to judge whether "this market" has the "juice" to break out above the recent peaks of the Dow, at 12,170 and 12,231, and the summer peaks around 12,725, with the intervening psychological levels at 12,100, 12,250, and 12,500. It would appear to be unlikely that there is that much enthusiasm for such a substantial rally, but you never know, and that's what these guys have to judge. The short-term guys may indeed take a negative bias ("risk off") and simply wait for the market to prove them wrong.
Meanwhile, traders and speculators with a longer view are trying to decide whether there may be some light at the end of the tunnel six to nine to twelve months down the road, and if so then now may be a decent entry point, or at least "buying on weakness" as the rally wavers but doesn't completely fall apart.
Cynics may passionately believe that Europe and the euro are "doomed to fail", but just because they want that outcome doesn't mean it will occur. A lot of the difficulty in Europe right now is more political and even personal (big egos and face) rather than strictly technical or economic in nature. There are a number of paths they can pursue to "dodge the bullet" and it is simply a matter of letting the drama and theater of the personal politics play out before letting the pieces of the puzzle fall into place, not for some grand, ultimate solution, but simply "good enough" to muddle through to the next stage.
In short, we could see either a correction or another leg up, and with roughly equal probability due to the murkiness of the economic outlook for 2012. In truth, in theory (Dow Theory), the market itself is supposed to be the primary "barometer" for where the economy is headed nine months from now.
From a practical perspective, the two main daily market scenarios are: 1) start the day with a pop but see it fizzle and turn into a decline due to "sell into any rally" sentiment, and 2) start the day with a modest pullback, but see that negative sentiment quickly run its course and reverse into a rally for the day due to short covering. But if sentiment really does flip to "risk off" or a stronger sense of "risk on", then we would see stronger moves down or up.