S&P 500: Reduction of stocks above medium-term 63-DMA warns a broader downturn – Credit Suisse

The S&P 500 is expected to extend its consolidation phase beneath the February ‘pandemic gap’ at 3260/3338. Immediate support is seen at the 3021 200-day average while initial resistance awaits at 3153. Meanwhile, the percentage of S&P 500 stocks above their medium-term 63-day average has rapidly reduced, suggesting a broader downturn, according to Credit Suisse’s analysts.

Key quotes

“Immediate support is seen at the 200-day average at 3021 but only below 2966 would mark a near-term top, with support then seen next at 2923, before 2835 – the 38.2% retracement of the rally from March - which we look to then ideally hold.”

“Immediate resistance is seen at 3153/56, then 3190, above which we see 3233 and then 3260/3338. Above 3338 can open the door to not only a challenge on the 3394 record high but likely a move above here in due course, with resistance then seen next at 3500.”

“59% of S&P 500 stocks are above their 63-day average, representing a rapid fall from well over 90% earlier in June. Whilst this could be a warning with respect to a broader downturn, it does also suggest the ‘market’ is no longer overbought.”

“The number of stocks above their 200-day average continues to fall steadily, now at 33%, still pointing to a more neutral albeit slightly oversold long-term state.”


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