S&P 500 Index: Strong push higher exposes a series of red flags – Credit Suisse

The S&P 500 stays on course for the 4200 level, although “red flags” are starting to emerge, as the Credit Suisse analyst team notes. 

See: S&P 500 Index to end the year at 4200 as higher yields set to cap the rally – CE

93% of S&P 500 stocks are now above their 200-day average and the “market” remains “overbought”

“Key ‘red flags’ for the S&P 500 are as follows: The rally has extended to the top of its multi-year channel from the 2009 low. We have moved to the upper end of its ‘typical’ extreme – 15% above the 200-day average. OnBalanceVolume is not confirming the new highs and shows a clear bearish divergence. Outright Volume is now falling as the market itself moves higher. 93% of S&P 500 stocks are now above their 200-day average. Weekly DeMark Sequential is now seen very close to an exhaustion signal.”

“Classic momentum measures though are not yet seen at an extreme and we see scope for the market to get more overstretched yet and we continue to look for further gains to 4175, then ideally our core Q2 objective at 4200. It is from here we would then look for signs of a potentially more important peak and a corrective/consolidation phase.”

“Big picture though, even if correct, our bias would be to view a pullback/correction from 4200 as temporary and corrective, with a clear break seen opening the door to a move to 4260 next, then 4350/55.”

“Support moves to 4068 initially, with a break below 4034/20 needed to suggest a consolidation/correction phase has already begun, with support then seen next at 3984, then more importantly the 63-day average at 3904.”