The S&P's 39% annualized run rate from last November's low through its early April record high appears due for a downshift. Over the past three months, the S&P has broken out above its two previous bull market peaks - the March 2000 high of 1527 and the October 2007 high of 1565 - and closed last week just 0.7% below its April 11th record high of 1593. In light of the recent rally's unsustainable (in our view) pace and the round number of 1600 looming, we think it would be natural for the S&P to have a period of consolidation or even pull back by a modest amount before moving higher. In a pullback, we expect support around 1530 and then 1500 to 1470, the 38% and 50% retracements of the November-April rally. However, as long as the Federal Reserve, the Bank of Japan, and the European Central Bank remain committed to providing open-ended monetary stimulus, we expect the depth and duration of any stock pullbacks to be limited.

David Fuller's view I agree with RiverFront's analysis of the S&P (weekly & daily). However, predicting reactions and consolidations in a bull market, which we are seeing, is often more difficult than identifying reaction lows within the overall upward trend.

A key factor helping to drive this advance has been the extreme bearishness expressed last November, as the rally was commencing. It signalled that many investors were significantly underweight equities and ended up chasing the rally as it developed. Consequently, there have been more buy orders following the S&P higher than overhanging sell orders.

Currently, everyone is watching the S&P test its high established on 11th April, just beneath 1600, and a downward dynamic is required to confirm selling pressure in this region. That could be an important signal, if it occurs, but we will not have confirmation that the imbalance in favour of demand relative to supply is temporarily over until we see a lower high and a lower low. You will see what I mean if you look at the small September-October 2012 top which marked the onset of a correction.