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S&P 500 moved sharply lower yesterday breaking below 3079/66, which turns the focus onto the crucial 200-day average at 3020/18. Below here, the index would point towards a deeper correction, according to economists at Credit Suisse.

Key quotes

“Key for today’s session will be the 200-day average at 3020/18. A close below here would confirm that a more concerted correction lower can emerge, with the next support then seen at the 2966 low, before the 38.2% retracement of the entire rally from March at 2835. We will be watching closely if MACD turns outright negative and whether volume picks up should the market continue lower to determine whether or not we are dealing with a more concerted setback.” 

“Near-term resistance now moves lower to 3067 initially, then yesterday’s breakdown point at 3076/79. A clear break back above here today would remove the recent downside pressure and the imminent risk of a deeper correction and point to further sideways price action.”