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S&P 500 strength stays on course to test the top of its February “pandemic” gap at 3328/38, but economists at Credit Suisse still believe this level will cap the index at first for a fresh consolidation phase. Meanwhile, the VIX is starting to move below key support and may be returning to “normal” levels. 

Key quotes

“S&P 500 has held flagged high-level support at 3200/3198 and this keeps the immediate bias higher for a test on the top of the February gap at 3328/38. We continue to look for this to remain tough resistance for now for lengthier consolidation. A break in due course though should clear the way for a challenge on the 3394 record high.”

“Below 3200 would mark a minor top to reinforce the likelihood for further range-trading with support then seen back at 3128/16, which we would look to hold. A break though can see a retest of support from the 200-day average, currently seen at 3052, but with only a close back below here seen raising the risk we are seeing the construction of a potentially important top.”

“The VIX is moving below key support from the top of its 2019 range at 24.81/23.54 and a weekly close below here would be seen opening the door to more ‘normal’ conditions with support seen at 20 next.”