S&P 500 to test the 3026 200-DMA in an extension of corrective phase – Credit Suisse

S&P 500 should test the 3026 200-day moving average in the opinion of economists at Credit Suisse as the index has been unable to seize the positive economic data released in the past days. Furthermore, the VIX behaviour reinforces the view for a corrective phase.

Key quotes

“The latest positive data surprise has not been accompanied by a fresh move higher in the S&P 500 which typically points to an exhaustive condition, adding weight to the view for further consolidation/corrective weakness.”

“We see scope for a retest of the 200-day average at 3026, with fresh buyers expected here. Only below 2966 though would mark a top and a more concerted move lower with support then seen at 2835 – the 38.2% retracement of the rally from March - which we look to then ideally hold. A close below 2835 though would warn a more important top may have been established in June, with support then seen next at 2712/04.”

“Resistance at 3190 capping can keep the immediate risk lower. Above can reassert an upward bias for strength back to 3233 and then into the broad 3260/3338 price gap. Above 3338 can open the door to not only a challenge on the 3394 record high but likely a move above here in due course, with resistance then seen next at 3500.”

“43% of stocks are above their 200-day average which is seen as a neutral state.”

“The VIX is holding key flagged support around 26/24 and we expect this to remain a floor through Q3 which if correct would suggest little scope for US High Yield Credit spreads to tighten further from here further reinforcing our view for a lengthier consolidation for the S&P 500.”