The Bucket Brigade Theory of 1420

The bull case for the S&P 500 is becoming more apparent to traders by the day: The 1420 level is a key battleground and has been for months, if not years. On a shorter-term timeframe, the daily chart below indicates that price is struggling to surpass the 1420 print as well as the declining 50-day moving average (blue line).

However, the bears have failed to forcefully reject the bulls away much lower, unable to close us below 1400 and even 1409 for any period of time. Thus, each time the bulls knock on the 1420’s door, it amounts to a bucket brigade relay race where another bucket of water goes into the huge bin. Bulls are looking for the bin to overflow, and for 1420’s to eventually give way to the huge amount of knocks on the door, while bears are hoping that time runs out on the race, and they can finally attain the violent rejection bull trap they are after.

On its face, given the prior two-week V-shaped rally, the edge goes to the bulls (though not by much) with the resilience price has shown above 1400.

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