NEW YORK (

TheStreet

) -- Wall Street on Tuesday will return from a long weekend to a market that has sleepily ticked upward for two months -- leaving investors to question whether bulls or bears are charging back from the Hamptons.

Traders seem to have maintained the mentality that it's not about how bad things are, but whether they're as bad as expected. The

jobs report on Friday showed that more payroll cutbacks sent the unemployment rate to 9.7%, the highest level in 26 years. Still, it got merely a shrug in the market.

"The consensus was 9.6%, so it wasn't really that much of a disappointment," says John Wilson, chief technical strategist at Morgan Keegan. He noted that stocks "briefly went flat" after the jobs data were released, only to rebound shortly after.

That attitude has sent the market about 15% higher since hitting a quarterly low two months ago on July 10. Volume has been seasonally low, but still 6% higher than the corresponding period a year ago, based largely on heavy trading in financial stocks like

Citigroup

(C) - Get Report

, because of its preferred stock exchange; "zombie stocks" like

American International Group

(AIG) - Get Report

,

Fannie Mae

and

Freddie Mac

; and other big banks like

Bank of America

(BAC) - Get Report

and

Wells Fargo

(WFC) - Get Report

, because of news surrounding the payback of their bailout funds.

Traders and observers have been predicting a reversal for several weeks, saying that the market has run up further than fundamental improvements would warrant. But the consensus forecast has shifted from expecting a sharp correction to seeing only a minor pullback -- and, so far, even that hasn't really taken shape.

Through the second quarter, there have been 30 days when the

Dow Jones Industrial Average

has ended positively, nearly twice as many as negative sessions. Eight of the upswings had gains of more than 100 points, vs. four sessions with losses of the same magnitude.

"We might have a little dip but we're not going to hit the lows of March again," says Frank Ingarra, co-portfolio manager for Hennessy Funds. "We might hit another bull run -- but based on real things this time, like earnings, outlook, production, etc. Profits could start screaming because

companies are pretty lean."

While that's the hope of many market participants, there are always the naysayers with a raft of economic data showing that things are, well, pretty bad. Even Ingarra notes that some key ingredients for a meaningful bull run are still lacking, and it's unclear when they will come to fruition.

The spenders that have been responsible for three-fourths of U.S. GDP in recent decades are still in hiding because many of them have no jobs. Those who are gainfully employed lack confidence that they will remain so. Therefore, they are not spending.

Retail sales data showed this week that the back-to-school season

didn't provide much of a bump for many big brands. While the biggest retailer,

Wal-Mart

(WMT) - Get Report

, stopped releasing monthly sales reports, competitor

Target

(TGT) - Get Report

didn't fare so well, with a 2.9% decline in August same-store sales. Others recognizable retailers like

Costco

(COST) - Get Report

,

Macy's

(M) - Get Report

,

JC Penney

(JCP) - Get Report

,

Saks

(SKS)

and

Gap

(GPS) - Get Report

also posted declines, as did teen retailers like

Abercrombie & Fitch

(ANF) - Get Report

and

American Eagle

(AEO) - Get Report

, which one might expect to thrive during back-to-school promotions.

Consumers are also still highly leveraged, but trying to pay down that debt, while facing continued financial stress with their biggest assets -- their homes. Liabilities related to housing, commercial real estate and delinquent or defaulting consumers are also weighing down the financial industry, and it's unclear how those "toxic assets" will be handled.

By this logic, a true rebound may have to wait until employment, housing and consumer spending start getting better -- not just getting less bad. All those factors will, in turn, affect demand and production.

"That is the challenge -- when are people going to feel good about themselves to spend a little more?" says Ingarra. "We don't have that right multiple yet to figure out forward-looking earnings."

On Tuesday, the first trading day of the holiday-shortened week, consumer credit data will provide some insight into the average American household's balance sheet. The University of Michigan's Consumer Sentiment Index to be released on Friday will provide further evidence of how those spenders are feeling, and whether they'll come out of hibernation any time soon.

Lots of commentary will also emerge from the

Federal Reserve

as the market continues to fret over how the central bank will pare down its enormous balance sheet and keep inflation in check once a recovery does take hold. The Fed's "Beige Book," which provides analysis of the economic situation in 12 regions of the country, will be released on Wednesday. At least three Fed presidents, two of whom vote on interest-rate policy, will also give speeches on inflation, economic challenges and "global interactions."

Walter Gerasimowicz, hedge fund manager and CEO of Meditron Asset Management, says he expects monetary policy to eventually hurt the Treasury market, despite its recent strength. While few expect inflation to be an immediate concern, he is shorting 20-year Treasuries, and won't be surprised if the equity markets have some collateral damage from "all the money that's being printed and issuance that's out there" as well.

"We're fully expecting a 5% to 8% correction, some of which may be occurring as we speak," says Gerasimowicz, as the market was experiencing a very temporary dip. "But we do not expect a complete reversal."

-- Written by Lauren Tara LaCapra in New York

.