S&P 500 Index: Close above key support at 3646/42 keeps the near-term risks higher – Credit Suisse

The S&P 500 Index reversed higher late on Friday to post a small potentially bullish ‘hammer’ candlestick reversal pattern, which looks set to be reinforced by further bullish price action today, per Credit Suisse. 

Key quotes

“The S&P 500 reversed higher late in the day on Friday, posting a small, potentially bullish ‘hammer’ candlestick pattern. This late reversal saw the market recover to close above key price/gap support and a short-term uptrend at 3646/42. Whilst above here on a closing basis, our immediate bias stays (cautiously) higher with resistance seen at 3681 initially, above which is need to clear the way for strength back to 3712, above which would negate the recently completed ’reversal day’ and open up 3720/25. Above in due course though should see what we look to be a tougher test of a cluster of Fibonacci projection levels in the 3765/85 band.” 

“Nevertheless, a small bearish ‘reversal day’ on elevated volume is still in place, with daily MACD also crossing lower. With the market also still seen in a ‘euphoric’ state (91% S&P 500 stocks are above their 200-day average and the market above the upper end of what we see as its ‘typical’ extreme) the rally is still seen at a more critical and vulnerable state and supports need to continue to be watched very carefully. However, only a close below 3646/42 would suggest a more concerted correction lower is underway with support then seen next at 3625/22.”