The combination of very low interest rates, massive federal deficits, and high stock market prices is unsustainable. 

Interest rates will stay low only if growth remains slow.  But, if economies grow slowly, then profits will not rise fast enough to justify current stock market share prices and incomes will not rise far enough to justify the prevailing level of house prices (see #5 in Facts That Make A Difference below for more info on home values). 

If, on the other hand, the markets are right about the prospects for economic growth, and the current recovery is sustained, then governments (both U.S. and foreign) will react by cutting off the supply of cheap money later this year by raising interest rates among other maneuvers.  Historically, the stock market has declined when interest rates started to rise. 

In summary, government actions including the FED’s movements must be closely monitored.  This is the best litmus test for the direction of the 2010 stock market.