Could I be wrong about the Stock Market?

How could I be so wrong in my thinking about where the markets should be heading? I have been bearish, awaiting a retest of the lows (and possibly lower than that) of March. I have been in and out of several individual equities with short term trades, on both the long and short side...but have held out of committing a significant amount to anything close to a "buy and hold" trade.

I mean, really, wars in Iraq and Afghanistan, many major banks for all practical purposes operating while insolvent, two auto makers bankrupt, massive unemployment, foreclosures on homes, the coming foreclosures on commercial real estate, health care costs rising, insurance costs rising, budget deficits with numbers to big to grasp...why would buy and hold be a good thing?

Maybe the March lows won't be retested because the fear of the financial markets meltdown has diminished. The government's involvement has backstopped that fear, and that low was caused by the panic preceding the "guarantee" that our banking system will survive.

But even with that backstop, and the rise of 30% or more off of that low, what compels this stock market to go higher. With the reasons listed above, how does this thing keep going up? Talking heads are attempting to convey optimism through the "green shoot" and "second derivative" arguments, so I can see not going DOWN, but why up more and more? The wall of worry is being climbed in the markets, but the vines they are clinging to are precarious.

For now I dabble with a few trades and make do. After suffering through the losses after the dotcom bust, and the first portion of this recession-induced decline, I continue to live by the thought, "I'd rather be out of the market wishing I was in, than in the market wishing I was out".