Risk on sentiment continued again with stocks closing in positive territory as Treasury bonds finally caved and sold off.

The risk-on wave was not limited to just the stock or bond markets, affecting everything from crude oil to the Euro as well.

As an indicator of risk-friendly behavior, Mexican government bonds surged higher after a huge offshore inflow of capital (from a West Coast player).

Brazilian authorities had to mull intervention in the currency markets as capital inflows caused a rapid appreciation in the value of the Brazilian real.

Across Europe, blistering cold weather froze up the Danube River, an apt metaphor for how the European crisis has seemingly been put on hold for now.

U.S. initial jobless claims numbers were lower than expected and that gave further ammunition to risk takers.

Ultimately, the main factor driving the frothy market behavior is the massive liquidity that has been pumped into the global markets by coordinated government action.

The Federal Reserve's dovish interest rate language combined with the European Central Bank's LTRO (long-term refinancing operation) actions have made many a market bear eat pudding.

The time old refrain on the street is "Don't try to fight the Fed…you'll get run over" and so players are cutting their short positions.

How long the party lasts remains to be seen but for now the trend is your friend.

When the trend does break, however, the scramble in the opposite direction will be just as rapid as the rally.

A $25 billion mortgage foreclosure settlement between Federal and State authorities and five large U.S. banks was cheered by some as California and New York State finally signed on after objecting to earlier draft iterations of the deal.

The cash portions of the settlement, however, will strain bank balance sheets.

University of Michigan consumer confidence numbers are out on Friday.