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The S&P 500 Index maintains its rejection of the 3720/25 level and analysts at Credit Suisse see scope for a correction to the strong risk rally as we head into 2021, but view this as a healthy development, unwinding this overextension and leaving markets in a healthier condition to resume their core trends.

Key quotes

“A neutral ‘inside range’ session for the S&P 500 as the market consolidates following its successful defence of the 3633 low from earlier in December. Although the broader trend stays seen higher, with momentum not confirming the new highs in addition to further signs of exhaustion/’euphoria’ our bias remains to look for further consolidation/corrective weakness for now, prior to this core bull trend eventually resuming.” 

“Whilst resistance from the top of the recent price gap at 3709 caps the immediate risk stays seen lower with support seen at 3676 initially, beneath which can see a move back to 3656, then a retest of 3636/33. Only a move below here though would see a near-term top complete to warn of a more concerted corrective setback, with support seen next at 3594/90 ahead of the 38.2% retracement of the October/December rally at 3544/38.” 

“Above 3509 can ease the threat of a deeper setback for a retest of 3727/33. Beyond here can reassert the uptrend for a cluster of what we expect to be tougher resistances in the 3765/85 zone.”