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S&P 500 Index: Closing Above Key Support at 3646/42 Keeps Short-Term Risks High

The S&P 500 Index reversed higher late on Friday to post a small potentially bullish “hammer” candle reversal pattern, which appears to be bolstered by today’s bullish price action, según Credit Suisse.

Key statements

The S&P 500 reversed higher at the end of the day on Friday, posting a small and potentially bullish hammer-shaped candlestick pattern. This late reversal caused the market to rally to close above key price / gap support and a short-term bullish trend at 3646/42. While up here on a closing base, our immediate bias remains (cautiously) higher with resistance initially seen at 3.681, above which it is necessary to clear the way for force back to 3.712, above which would negate the recently completed ‘reversal day’ and open up to 3,720 / 25. Higher up, in due course, should be what appears to be a tougher test of a group of Fibonacci projection levels at the 3,765 / 85 “band.

“However, there is still a small bearish ‘reversal day’ in high volume, with the daily MACD also crossing lower. With the market still seen in a ‘euphoric’ state (91% of the S&P 500 stocks are above their 200-day average and the market above the upper end of what we see as their ‘typical’ end), the rally is still in a more critical and vulnerable state and more critical and vulnerable supports must continue to be closely watched. However, only a close below 3.646 / 42 would suggest that a more concerted downside correction is underway with support to be seen below at 3.625 / 22 “.


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