NEW YORK (CNN/Money) - After being the first to climb Everest 50 years ago, Sir Edmund Hillary suffered progressively severe bouts of acute mountain sickness when he ventured into the mountains. Eventually, he was forced to hang up his climbing gear and engage in lower-altitude pursuits.
Wall Streeters can relate. Over the past three years, each time the benchmark S&P 500 index has rallied, it has been unable to surmount its previous peak. In the fall, for instance, it peaked at 954, short of the 965 it hit in August. In January's rally it reached 935, falling short of its fall high.
Now the S&P is knocking up against 893, and traders are wondering if it might actually overcome its previous topping out point. It would be a big positive sign for the bulls, signifying that the long grinding down process portfolios have been subjected to might finally be coming to an end.
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But it's going to be a tough feat to perform. Learned behavior can exert a powerful influence, and Wall Street has learned that hanging on to stocks on the hope that they might actually poke above the previous high is a great way to lose money. Many of the traders who have made gains over the past month are looking to cash in their chips while they can. Meanwhile, bearish players are getting ready to bet against the market by selling short again -- which in itself can exert downward pressure on stocks.
Can stocks overcome the selling pressure? It all comes down to whether there are enough longer-term investors who really believe the market's worst is behind it, whether they're ready to back up that belief with cash, and whether their pockets are deep enough.
If the bulls win out, it could spark a huge rally -- first because many investors would see it as a sign that the worst is truly over, second because the shorts would be forced into buying back the shares they sold short, driving prices higher. If the bulls fail, the market will fall. Hard.
Either way, get ready for some fireworks.
-- Justin Lahart is a senior writer at CNN/Money covering markets and investing.
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