Looks like rather than a gap and go type of breakout, the S&P 500 is backing and filling this morning's gap up. Yesterday's high intraday was 1225.80 so it would be a short term healthy thing for bulls to see some retracement before the Santa Bernanke rally. We have also come a long way in a week as last Tuesday the S&P 500 bottomed near 1175. The 50 points since has created a rally of 4.25%.
Best case scenario for bulls is a quick fill of the gap and then a close above yearly highs say 1228+. Then 1227ish becomes the baseline for the rest of the year, as a support level. PreLehman in summer 2008 the S&P 500 topped out in the low 1300s so that would be a stretch target if traders go completely hog wild into the end of the year. A more reasonable target might be 1260-1270.
My normal rule of gaps filling on indexes in 2-3 months has been trumped by a global liquidity tsunami. It has now been 3 months and S&P 1090 and 1110 still sit out there, but with every arm of every major government and central bank tossing money into the fire pit, traders are Tepper like in their belief that nothing can go wrong. To which I will ask when does the commodity run up turn from positive to negative? In a super cool heroin filled economy as we had in 2007, it was oil north of $130. (gas $3.50+) Once more we are full of heroin but the underlying economy (and American citizenry) is in far worse shape (although corporate balance sheets ex-banks, are far superior). That said, we can fix it easy enough. As long as we're busy handing out money like it's nobody's business why not a Gasoline Cost Relief Act of 2011? Maybe a gift card of $1000 for every citizen with a drivers license in the country - don't laugh, anything is possible in a country where taxes can only go down, while spending can only go up. If we need not live under the guise of ever balancing a budget again, you can create 5-10% GDP from here to as far as the eyes can see. I would marry the gasoline card with the Did you spend money you did not have for Christmas 2010 Santa Act - $2500 funded to every American with a bank account*, via direct wire deposit courtesy of sugar daddy Uncle Sam. I have more ideas where these came from - just call me GOP Senators! (I too am compassionate and fiscally conservative... no child in America should be without an Xbox)
*only Americans who have $1000 or less in their savings account eligible. Any Americans who act prudently are exempt from government handout, as is the standing rule in Cramerica.