S&P 500 Index: Scope for an overshoot towards 4450 before a 5% correction lower – Credit Suisse

The beginning of Q3 has seen the S&P 500 achieve the 4350 level. Although economists at Credit Suisse see scope for further strength to the upper end of its “typical” extreme at 4420/50, they are starting to see signs of overextension again, and their bias remains for a cap below 4450 and for a summer consolidation to emerge, ideally this time a correction lower rather than a sideways phase.

S&P 500 is not far from its “typical” upper extreme 

“The S&P 500 has extended its uptrend, as looked for, to our 4350 next objective. We would still allow for a move to the upper end of what we see as its ‘typical’ extreme at 4420 (15% above the 200-day average), just shy of our 4436/56 Q3 objective.” 

“With momentum still not confirming the latest move to a new high, our base case remains to look for a cap in the 4420/4450 zone and for a fresh consolidation phase to emerge, potentially this time a correction lower of circa 5%.” 

“On a 3 to 6-month basis, we remain bullish and would view a pause below 4450 (if seen) as a correction.”

“Support moves to 4288/78 initially, then the 63-day average, currently at 4193, which we look to ideally hold. Only below 4164 would warn of a more concerted phase of corrective weakness.”