The S&P 500 initially pulled back during the course of the week, but then rallied again, only to give up the gains to form a lackluster candlestick.
The S&P 500 was somewhat noisy during last week, as we saw a lot of back and forth action between short-term selling and short-term buying. The 10 year note has been causing havoc in a lot of risk appetite based assets, including the S&P 500. As the 10 year note offers more interest, people are starting to rotate portfolio holdings in order to take advantage of an interest rate that is above 1.33%. At this point in time, we are still very bullish longer term, so I have no interest in trying to short this market as we could continue to try to find buyers underneath in order to build up the necessary momentum to get to the 4000 level. The 4000 level has been my target for some time, and we are not that far from there.
A pullback at this point will probably attract a lot of attention near the 3800 level, which is a large, round, psychologically significant figure, and depending on when we get there it could also be where the uptrend line shows up. In other words, there are plenty of technical reasons to think that this market goes higher, even though we may get a bit of noise from time to time coming out of the bond market. The overall attitude of the market is bullish due to liquidity flooding Wall Street, and therefore people need to put money to work. We are probably in the midst of a bit of a bubble, but quite frankly that tends to be the nature Wall Street over the last couple of decades: form a bubble, pop, bounce from the bottom, form a bubble, and then rinse and repeat.

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