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The S&P 500 is expected to extend the consolidation phase beneath the February ‘pandemic gap’ at 3260/3338 while retail sentiment continues to rise though institutional sentiment is approaching levels often seen with a pause, economists at Credit Suisse brief.

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Key quotes

“The S&P 500 has entered a consolidation/corrective phase as expected just ahead of the 3260/3338 “pandemic gap” from February. Our bias remains for this phase to remain in place for a while yet. 

“Immediate resistance remains seen at 3190, above which we see 3233 and then 3260/3338. A close below the 200-day average at 3018 can clear the way for a deeper setback with support then seen at 2955, then 2835 – the 38.2% retracement of the rally from March, which we look to hold.”

“Individual Investor Bull-Bear sentiment extends its rise from levels typically associated with an important low, reinforcing the positive price action we are seeing elsewhere and may be close to moving into positive territory while Financial Advisor Bull-Bear sentiment though is now approaching levels often associated with a market pause, adding weight to our broader consolidation scenario.”

“92% of S&P 500 stocks are still above their 63-day average adding weight to our view the ‘market’ remains overstretched near-term but the number of stocks above their 200-day average recently fell sharply, from over 60% to 42% currently, pointing to a more neutral long-term state.”