Search ForexCrunch

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.”