Rally on Wall St to be put to test

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The broad index is up 8.6 per cent for the year, closing at 1,365 on Friday. The S&P 500’s close was the highest since June 6, 2008, a few months before Lehman Brothers went bankrupt as the global credit crisis spiraled out of control. While the swiftness and magnitude of the gains have created concerns that the market is due for a pullback, a break above 1,370, which was 2011’s intraday high, could trigger more buying as investors fear missing out on further gains. “We have reached an exhaustion point and an inflection point. The sentiment is bullish and the money flow has gotten bullish, and that’s freaking people out a bit,” said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania. “What’s more likely, or normal, would be a 5-7 per cent decline (from current levels), but if we move above 1,370, that could be the next leg up.” The S&P 500 has struggled to climb above 1,370, but the level has thrown up strong resistance in the past week. For this week, the Dow Jones industrial average .DJI and S&P rose about 0.3 per cent and the Nasdaq Composite .IXIC added 0.4 per cent to close at its highest since mid-December 2000. Oil prices will also be in focus after Brent crude futures closed at $125.47 per barrel on Friday, the highest since last April, on fears of worsening tensions between Iran and the West. “The S&P and crude oil prices have been showing a correlation so far. But oil at where it is now is a big deal,” said Ben Schwartz, chief market strategist at Lightspeed Financial in Chicago. Schwartz explained that if oil keeps rising, it will threaten consumer confidence and pressure the stock market. The movement in the euro will also be closely watched for hints about markets’ appetite for risky investments.