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The S&P 500 Index has seen a further sharp fall following the daily and weekly DeMark sequential exhaustion signals and a bearish “reversal week” has now also been established to further increase bearish pressure. The Credit Suisse analyst team looks for a retest of the rising 63-day average and low for the year at 3666/63. 

Key quotes

“The technical outlook for the S&P 500 continues to deteriorate as not only do we have daily and weekly DeMark sequential exhaustion signals in place along with a divergent daily and weekly bearish RSI momentum setup but also now and potentially more significantly a bearish “reversal week” has been established on high volume. This raises the risk we may be set for a more significant and deeper correction lower than originally looked for.”

“We maintain our tactical bearish bias and look for a test of the 63-day average and low for the year at 3666/63. Whilst we would look for an attempt to hold here, a direct break can see bearish pressure increase further for a test of the 38.2% retracement of the October/January rally and December lows at 3636/28. Whilst we would expect a better defence of support here, a break would confirm we are indeed set for a more protracted fall with support seen next at 3488 and then the 200-day average at 3350, which if seen would represent a 13.5% fall from the peak.” 

“Resistance is seen at 3742 initially, with the immediate risk seen lower whilst below the price gap from Friday morning at 3778/87.”