S&P 500: 98% of stocks above the medium-term ma, correction phase – Credit Suisse

The S&P 500 has cleared the key 3000 200-day average but analysts at Credit Suisse expect consolidation at the 3260/3338 February ‘pandemic gap’ as 98% of S&P 500 stocks are above their 63-day average.

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Key quotes

“We see scope for strength to extend further into the 3260/3338 ‘pandemic’ gap from February, but would expect the top of this gap to cap at 3328/38 at first for a consolidation/correction phase. A direct break higher though is seen exposing the record high at 3394, and likely higher in due course.”

“Support from the 200-day average at 3010/00 holding pullbacks can reinforce the view that the longer-term trend is indeed back up. A closing break would instead warn of a peak for what could be a potentially lengthy consolidation/corrective phase, with support seen next at 2955/35.”

“98% of S&P 500 stocks have been above their medium-term average, which according to our data is levels not seen since the early 1980’s. Whilst this highlights good market breadth, it also suggests the ‘market’ itself is now overbought. Only 57% of S&P 500 stocks are above their 200-day average though, which suggests the longer-term trend is far from overbought.”