Traders are still reveling in the positive buzz from last week's fiscal cliff deal. But there are signs the good feelings won't continue for long. The looming debt ceiling fight is starting to generate attention, and it's poised to be a whopper with the Treasury set to drain its cash reserves as soon as Feb. 15.

There's more. Fourth-quarter earnings could post the first year-over-year drop since the recession ended. The economic data is beginning to disappoint. And yet, Wall Street sentiment and hedge fund positioning is extremely optimistic.

The disconnect sets the stage for disappointment, and lower stock prices, in the days and weeks to come. 

Here's why: 

Despite all the headwinds we face in 2013 -- the debt ceiling fight, Europe's unresolved debt problem, weak corporate earnings and revenues -- Wall Street strategists are expecting the S&P 500 to gain 9.4% this year. I think that's setting people up for disappointment.

In fact, the gap between where the strategists think the S&P 500 should be and where it actually is have increased to levels not seen since just before the August 2011 market meltdown caused by the debt ceiling fight and resultant credit rating downgrade of the U.S. Treasury. 

Before that, expectations swelled before the May 2010 "flash crash" caused by the outbreak of the eurozone debt crisis.

As for earnings, Barclays Capital strategist Barry Knapp notes that earnings will be dragged down -- particularly in capital spending exposed cyclical groups like energy, technology, and industrials -- because capital expenditures in Q3 was weaker than at any point outside of a recession in 25 years. Overall, earnings are expected to grow just 1% year-over-year, but a pullback in analyst revisions lately suggests that could be too high.

Financials are expected to fill the gap (non-financial earnings are expected to fall 1% year over year) but expectations may be too high with layoffs mounting and earnings estimate revisions for cyclicals moving lower recently.

At the same time, the technicals are also suggestive of at least a short-term pullback. Just look at the unprecedented drop in the VIX ($VIX) over the last week, down nearly 40% over the last five days. But medium-term volatility has only fallen 24.8%.

Translation: Options traders are betting that the market will calm down over the near term before the turbulence returns. This is known as a "steepening of the volatility term structure" as is often seen near major market tops.

Something similar happened in July 2011 as the market bounded higher in what proved to be a headfake rally ahead of the debt ceiling fight. Then, as now, the term structure steepened.

But the current steepening is of a much larger magnitude. That is, short-term VIX has dropped much than in those other examples. In fact, what we're seeing now resembles the kind of market price dislocations seen during panic selloffs -- the last two being the late 2008 meltdown and the aftermath of the May 2010 "flash crash" caused by the Greek debt crisis.

This brings us back to a point I made in the wake of last week's big market rise: Extreme price volatility, up or down, is a symptom of downtrends. Orderly markets don't suffer from this kind of behavior. And thus, the current market has all the hallmarks of a headfake, short-covering rebound -- albeit an extreme powerful one -- as the economic fundmentals, represented by the Citigroup Economic Surprise Index shown above, roll over.

I continue to recommend long volatility positions to take advantage of what's coming, including the iPath S&P 500 Short-Term VIX (VXX) or the Velocity Shares 2x VIX (TVIX).

Disclosure: Anthony has recommended both the VXX and TVIX to his clients.

Be sure to check out his new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.