The Major U.S. benchmark indexes closed lower on Friday. The Dow ended the session at 18132: down -81 points (0.45%). The Nasdaq Composite close at 4963: down -24 points (0.49%). The broad benchmark S&P 500 finished the session at 2104: down -6 points (0.30%).

On the NYSE declining issues (3687) outnumbered advancing issues (3028): 52% to 44%. 

S&P futures pulled back 17 points below the current all-time record high at 2118, trading down to 2101 late in the day, before auctioning up modestly to 2106 atFriday’s close.  On 02-18-15 S&P futures rallied up to 2100, before selling off from the high and pulling back to 2082.  Since the 02-20-15 pull-back

Friday’s Morning Briefing

After auctioning up to 2118 during Wednesday’s session, S&P futures pulled back the distance of an average daily range (17-23 points) on Thursday trading down to 2101.

The last time the S&P pulled back the distance of an average daily range was on 02-20-15, when the S&P traded down to 2082. Follow the 02-20-15 pull-back the broad benchmark indexes went on to rally 36 point, up to the current all-time record high at 2118.

Astute market observers are aware that pull-back and retracement are part of what is called normal market development. According to the CBOT, auction markets function of on a dual mechanism consisting of buying interest and selling pressure which is a part of price discovery.

In other words a market will rally until there is no more buying interest and or buyers feeling “price” has auctioned to high. Similarly, a market will sell off until there is no more selling pressure, and or selling feeling “price” has auctioned to low.

In an ascending market a pull-back is an opportunity to buy at a relative discount to the current high.

The distance of an average daily range provides a statistical reference by which a relative discount can be inferred.

Apart from the range measurement itself, is the pattern or sequence of the pull-back in the auction context. In other words, the time of the pull-back and retracement provide information (feedback) regarding the “condition” (state) of the auction.

A pull-back early in the session, followed by a re-test of the high is an indication of strong buying interest. A pull-back late in the session that fails to re-test the high is an indication that buying interest is waning.

Yesterday’s pull-back came late in the day. There was insufficient buying interest to auction the S&P above its previous day’s close.

While support held at or near the previous high 2100-2098 there was on buying interest in the overnight session, willing to auction S&P futures above 2110-2112.

The lack of buying interest above the 2110-2012 price level does not yet indicate the rally had run its course and a more substantial pull-back is likely.

However, we would remind our readers that on 02-02-15 the S&P futures traded at 1970. The S&P is up 138 points (6.8%) above the February low. 

Coming into Thursday’s session we noted that the current 33.50 point rally is due for a pull-back.

The previous high at 2098-2100 is now near term support.

The prior daily range pull-back level at 2084-2080 is key support. Below the lower edge of the current trade cluster there is additional support at 2036 and 2020.



Overnight, S&P futures pulled back modestly below Tuesday’s closing range all time record high at 2116 and traded down to 2110.

Since pulling back the distance of a daily range (17 points) below the prior high at 2098-2100 on 02-20-15 and trading down to 2082-2080, the Board Benchmark Indexes has rallied 33.50 points (1.6%).

The rally that started on Friday with the S&P breaking out above the prior high 2098-2100 and initially auctioning up to 2110 pulled back to 2100 on Monday. During Tuesday’s session S&P futures re-tested support at 2103 before extending the trading range up to 2116 into the close.

Yesterday we noted the based on the pull-back to the prior high 2098-2100 the maximum likelihood expectation estimate to the up-side was 2120: 36 to 38 points above the prior low, without a minor pullback equal to 11 to 14 points.

While the majority of the trade activity at the high has taken on the pattern of the HFT Market Maker algorithmic sequencing, never the less all three Major U.S. benchmark indexes posted all time record higher highs at yesterday’s close. The Dow

On Wednesday, after rallying up to 2118, at or near the maximum likelihood expectation level at 2120, S&P futures made a 10 point pull-back, trading down to 2108, before attempting to auction back to re-test the high. Buying interest waned as the S&P traded up to 2115 into the close.

Overnight, S&P futures sold down to 2010, before auction back to 2115. The narrow range development continues with the S&P trading in the up 2 points, down 2 points HFT market marker sequence for prolonged period of time, without attracting sufficient buying interest to sustain the rally.  

However, on the NYSE advancing issues (3657) outnumbers declining issues (3012): 51% to 46%. Thus, it would appears there are still more buyer willing to initiate positions at the high, than there are sellers.

On Wednesday, Fed chair Janet Yellen appears before the House of Representatives' Financial Services Committee. While Yellen talked about a solid and improving economy, she provided no solution to the disappointing labor force participation and anemic wage growth. Yellen said it would be several months before the Fed would boost rates. The Federal Reserve has not raised rates since 2006.

Thus, QE in the form of zero interest rate appears to be the primary source of capital fueling the rally. 

Friday’s pulled back below the previous high 2098-2100 has established near term support at 2084-2080. Below the lower edge of the current trade cluster there is additional support at 2036 and 2020.

In other words, the current rally above the 2084-2080 price level (+35.50 points) is due