Billy McNeill believes Celtic are displaying confidence ahead of next Wednesday's key encounter with Rangers.
Neil Lennon's side have reduced the gap on leaders Rangers to four points and the former Parkhead legend thinks it gives Celtic a mental advantage.
"I think Celtic have got to be favourites," said McNeill. "They are sitting in a powerful position.
"They've played some nice football. Neil's team are playing well enough to get to the top of the league."
Kilmarnock visit Celtic Park and Rangers play St Mirren in Paisley on Saturday but there is growing anticipation ahead of the second Glasgow derby of the season.
And former Celtic captain and manager McNeill claims his old club are well equipped for a crucial period of the campaign.
"This part of the season is one that proves if a team are capable of winning the league," added McNeill.
"This is often when teams lose their way but at the moment Celtic look positive and look as if they have got a team capable of winning.
"I was interested in how the mix of players would get together as a team but I think Neil has worked very well. He has been very positive in what he has done.
"When he makes a change he seems to get a turn from the players.
"When you come to the turn of the year, you have the Old Firm game, which is always important.
"A result in that game would work wonders for Celtic."
McNeill was less enthusiastic about those Celtic fans who have landed the club in the dock again.
On Monday, Uefa confirmed they had opened disciplinary proceedings against Celtic, charging the Glasgow club with "the displaying of a banner of an offensive nature and the setting off of fireworks by supporters" during their Europa League game against Udinese in Italy last week.
The incidents came days after the club were fined £12,700 for "illicit chanting" involving pro-IRA songs at a Europa League game against Rennes at Celtic Park.
Following the game in Udine, Lennon, chief executive Peter Lawwell and chairman Ian Bankier rounded on the "rogue fans" who had "embarrassed" the club and McNeill understands their reaction.
He said: "I think they have to show that they are not going to accept that type of behaviour.
"It is evident that they are disappointed.
"I have seen loads of things and I often wondered why Uefa didn't step in and do something about it.
"I think Uefa pick and choose.
"They have now decided to jump on Celtic's tails, but it is necessary in any event and here's hoping that the fans take heed.
"Celtic have always had a great support and it is disappointing to see people being as daft as they have been.
"But I think it is a small amount of fans who have misbehaved."