S&P 500 saw a strong end to a strong week and the rally has now extended to the 4200 level. The index is seen at its “typical” “extreme” and tactically overstretched and although the long-term outlook remains bullish, economists at Credit Suisse remain highly alert to a potential consolidation/corrective phase.
S&P 500 stays seen at its “typical” extreme
“Although the long-term trend stays seen higher, we continue to see a range of ‘red flags’ to suggest the market is tactically overstretched. The market remains above what we see as its ‘typical’ extreme – 15% above its 200-day average – and daily, weekly and monthly RSI measures are all around 80 and Volume/OnBalanceVolume is still not confirming the new highs.”
“It is important to stress though we do not have any actual ‘sell signals’ as yet but we maintain our view we are getting close to a peak to this phase for the emergence of a consolidation/corrective phase, ideally from around our 4200 target and we are thus alert to signs of stalling from here. Should strength directly extend though, we see resistance next at 4225/30, then 4259/60.”
“Near-term support moves to 4171/70, below which can at least ease the immediate upside bias, but with a close below the accelerated 5-day exponential average at 4152 needed to suggest the rally is at last stalling for a test of 4125/21 next.”