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S&P 500 has seen a sharp sell-off and a close below the 63-day average at 3391 would see the ‘head & shoulders’ base negated to reassert a sideways and likely choppy range into the US election. Meanwhile, the VIX has completed a base to warn of a more concerted move higher and likely lower for the market itself, with next resistance seen at 36.20, per Credit Suisse.

Key quotes

“A poor start to the week has seen a sharp sell-off for a conclusive break of the 38.2% retracement of the September/October rally at 3420, but with the index for now managing to hold on a closing basis its rising 63-day average, now seen at 3391. Despite this though support from the ‘neckline’ to the ‘head & shoulders’ base has been removed and whilst resistance at 3466 caps, the immediate risk is seen lower.” 

“A close below 3391 is needed to confirm the base has indeed been neutralized to reassert the sideways range from the early September peak. We would then see support next at 3365 ahead of the late September price gap, starting at 3324 and stretching down to 3298/93.” 

“Near-term resistance is seen at 3415, then 3440/41. Above 3466 is needed to reassert a positive tone again, with resistance then at 3516/18.” 

“Bigger picture, we watch weekly momentum closely which is beginning to tire noticeably and may potentially forming a top.” 

“The VIX has completed a base to warn of a more concerted move higher, with resistance then seen next at 36.20.”