Healthy Correction?

After failing to break through the April highs of 2010 (around 1220 on the S&P), the market is now challenging a fairly strong support level around 1190-1194 on the S&P. A failure to hold at this level could trigger another 3-5% dip that would amount to a cumulative 8% correction or so. By most standards a fairly healthy one at that.

Let's consider the current "supporting winds" that encourage bullishness:
(1) Retail sales and consumer spending continues to improve;
(2) strong corporate earnings; and
(3) the Fed's move to inject approx. $900 billion in sum over the next 6 months into the economy and to keep long term interest rates low.

And now for the "head winds":
(1) European sovereign debt issues re-emerging (altho a kick-the-can-down-the-road resolution to these should occur sooner than later);
(2) Cisco earnings that showed significantly poor outlook heading into year end (thus far the market has not yet extended this negativity to the rest of the tech sector; although I find it hard to believe Cisco is an isolated case here)
(3) Emerging market and commodity inflation concerns (although not immediate);
(4) Political gridlock and business uncertainty regarding structural factors (housing, healthcare, etc).
(5) Chinese intentions to raise rates and/or other measures to control inflationary and bubblish growth

All in all - the headwinds (while severely troublesome in the long term) don't appear ready to inflict immediate consequences. Pair that with gradual economic improvement and you may well emerge from this correction with a resumption of bullishness.