Over the holiday weekend S&P future extended the trading range, auctioning up to 2095: 36 points above near term support at 02-11-15 low: 2058-2060.

Following the rally up to 2095, S&P futures sold-off 14 points below the 2095, pulling back to 2081, before attempting to re-test at 2093-2095 during the Monday’s overnight session. The order flow events during the re-test indicated a lack of buying interest (buy programs waning) and as of this post selling pressure has auctioned S&P futures down to 2089.

At Friday’s close, the Dow ended the session up 46 points (0.26%) closing the week at 18019. The Nasdaq Composite was up 36 points (0.75%) to close at 4893. The broad benchmark S&P 500 finished the week at 2096: up 8 points (0.41%).  On the NYSE advancing issues (4369) outnumbered declining issues (2340): 61% to 33%.

All rallies end when the auction failed to attract new buying interest and or all those who wanted to buy the high have done so. At that point the market either “pauses” at the high and or sells off. Minor pull-backs, like the one witnessed during the holiday ceased to hold support. A relative discount is typically required in order to attract new buyers.  Once it has been established that there is no buying interest above the new high, the market will display the pattern of longer term range development.

In other words, an average daily range discount (17 to 23 points) will no longer be sufficient. Near term support levels will be breached and major support will be re-tested. Often a

S&P future ended the week higher, trading up to the previous all-time record high at 2088 and extending the trading range modestly higher auctioning up to 2095 at Friday’sclose. The modest 7 point higher high represent a gain of 0.03% above the previous high, a merger sum compared to the 123 point (6.2%) gain for the buyers at the January, February lows.

 

While the financial news media was once again absorbed in irrational exuberance by the modest higher high, astute market observers are well aware of the fact that the S&P has sold off on average 100 points below every previous new all-time record high.

After trading up to a new all-time record high at 1983 in September, the broad benchmark indexes sold down to 1821. The early December rally up to 2079 was followed by a sell-off to 1960. The end of December rally up to 2088 was followed by a sell-off to 1970.

Indeed, the market development of the past 3 year shows a similar pattern has followed all new record highs. While you may read headlines in the financial media saying “this time will be different”, there is no evidence to support such bullish argument. Therefore, we can state will 100% certainty that probability favors that S&P will similarly sell-off from whatever level become the new record high.

 

In the context of

S&P futures traded higher during the overnight Globex session, rallying up to 2080 (26 points) and pulling back to 2058 (21 points) before trading back up to re-test the high at 2078 (19 points).

The price trajectory is on the path to re-test the 12-29-14 all-time record high at or near 2088-2090.

In the previous session, S&P future traded up to 2066: 23 points above the prior low at 2043. The rally “paused” at the high, before pulling back to re-test support at 2054-2053 price levels noted in yesterday’s market commentary.

Astute market observers, who follow the patterns of pull-backs and retracements, will note the relatively consistent ranges of market development mentioned in our daily commentary. This statistical evidence confirms there is never a benefit to buying the high as historical market development confirms that rallies are followed by pull-backs and declines are followed by retracements.

It should also be noted that the major U.S. indexes, the Dow, the Nasdaq and the S&P have sold off from every all-time record high. Indeed, the S&P sold off 100 points below its current all-time high at 2088. A review of the market development of the past 4 years bull market shows that every record high has been followed by

S&P futures sold off in the overnight session, pulling back below Tuesday’s high at 2067 and trading down to 2058.

In the previous session, S&P futures rallied above the overnight low at 2042, trading up to 2059. At the open, S&P futures pulled back to re-test support at 2044, the prior day’s close.

The rally stalled during the mid-day session, when price auctioned back to minor pull-back to the overnight high. However, after “pausing” at the high for approximately 2 hours, late in the day, S&P futures broke out above the overnight high and trade up to near term resistance at 2067.  There was a modest pull-back to 2062 at the close.

The overnight sell-off to 2058, less than 10 points below Tuesday’s high, equal the price level where the late in the day rally was initiated. Thus, if support at the open low holds there is still the potential for the S&P to re-test Tuesday’s high and make a higher high.

A break-down below the 2054-2053, the low of the minor consolidation level that preceded the break-out would a rejection of the high, selling pressure would likely accelerate and the S&P would auctioned back down into

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