S&P 500 Index to see further sideways consolidation, with support at 4176/75 – Credit Suisse

S&P 500 closed the week back below 4200 on Friday. With another neutral session on Monday, economists at Credit Suisse believe the market remains in a consolidation phase, which it is expected to persist going forwards.

Reluctance to chase S&P 500 higher in the short-term

“The S&P 500 reversed to close back below our Q2 objective of 4200 on Friday. With a range of ‘red flags’ and overextension signals still in place, including OnBalanceVolume still not confirming the new highs and a growing bearish momentum divergence, we still do not look to chase strength beyond here for now.” 

“We look for a continuation of the recent consolidative range and further sideways ranging. Support remains at 4176/75 initially, which now includes the 13-day exponential average. A close below here would suggest a deeper corrective setback and a lengthier sideways phase, with support seen next at 4124.”

“Only below the 4118 recent low though would mark a near-term top.”

“From a medium-term perspective, we maintain our core bullish outlook and view the current consolidation/correction as a temporary and healthy pause within this core uptrend. With this in mind, an eventual close above 4219 can reassert the uptrend and end thoughts of a consolidation, with resistance seen next at 4225/29, with tougher resistance expected at 4259/60.”