The S&P 500 index continues to extend losses for the week, as bullish momentum to take it to the last vestiges of the 4200 price target appears to have fizzled out. Economists at Credit Suisse are indicating the potential for a consolidation/corrective phase from the 4200 psychological target that the bank called a few weeks back.
According to the bank’s analysts, the rally S&P 500 appears to have stalled, close to the Q2 objective of 4200. The market is now at an extreme, trading at 15% above its 200-day average. Credit Suisse also notes that the OBV indicator is not confirming new highs.
The bank’s analysts also see that the RSI momentum is showing signs of topping, which reinforces their view that a V-shaped correction to 4140 (near-term support) is in progress. 4125/4121 is seen as further support, below which the outlook that a near-term top has been reached is reinforced. This reinforcement, according to the analysts, brings in “4097/4096, then 4068” into the picture.
Credit Suisse rounded off the analysis by marking 4225/4230 and 4259/4260 as potential price targets to the north if strength pushes the S&P 500 index above 4200.
Technical Levels to Watch
The decline from point D on the “W” pattern on the daily chart appears to be on track. Today’s decline continues the potential march towards the 38.2% Fibonacci retracement point from the swing low at point C to the swing high at point D, which is found at 4062.8. Below this level, other Fibo retracement levels at 4022.1. 3981.4 and 3910.5 become additional targets if the decline is extensive.
On the other hand, bulls need the S&P 500 index to beat the 4191.3 all-time high to hit the 4200 price target called by Credit Suisse. If the price extends beyond this level, then 4301.0 (200% Fibonacci extension) becomes an additional target.