Stock averages wafted into the rafters Friday, setting the stage for an attempt over the next week or two to lift the roof on this year’s constipated range. For the S&P 500 Index, that would require a move above the 1245.86 high recorded in early August. That’s almost exactly 4% above current levels, and one could expect the financial press to rain fireworks and confetti on Wall Street if and when it occurs. We can already see the headline: “Stock Market Investors End Year With a Bang!”

(Click on chart to enlarge)

However, the chart above shows why the celebration would be premature. My view is that a breakout to new yearly highs would portend nothing special and that a truer test of the bull’s mettle awaits at 1315.93. That’s where a key peak was recorded in May of 2001, about half-way into the two-year bear market, and it is considerably more daunting than the petites tetons of  2005. Once above that number, the S&Ps would deserve the respect of even the most skeptical bears, of which I am surely one.

In the meantime, we needn’t speculate on the outcome, since there are plenty of trading opportunities for bulls and bears alike. We try to keep a small number of put options in inventory at all times, of course, but only so that we don’t have to curse ourselves if the stock market topples from its pins without warning. Treat those puts as you would a Trifecta combo topped by  a 20-to-1 shot and you’ll be less inclined to kick yourself if stocks continue to rise into the ether, as they well may.