The Battle of 1120 Concludes, but the War Lingers

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The 1120 level on the S&P 500 is a reference point I have been discussing for over a month now, and it once again has proven to be a place where bulls are willing to step up and buy vigorously, despite all of the headwinds the economy and markets face. So far this week, the bears have short-term thrown in the towel, and we are starting to see some classic squeezes higher across the board. I have been very defensive of late, and therefore walked into today in full cash.

The issue now is whether this rally has legs to go much higher than we think possible. Psychologically, it is quite easy to expect the rally to fizzle out like so many others over the past few months. We are likely to have (or are currently seeing) month-end and quarter-end window dressing. So, there are plenty of reasons to doubt the rally. However, that in and of itself may be a reason to fade the conventional wisdom.

Missing out on a huge rally is something that I have become numb to, because otherwise the market will break your spirit and cause you to feel an endless cycle of regret. The old poker saying goes, “You can’t show at the table what you don’t feel.” The great thing about the market is that there is always another opportunity, and we may very well be looking at that right now.

Either way, the bulls won this latest major battle of 1120, but it is way to early too say that they have won the war of this market trend.