Credit Suisse: Top in S&P 500

“… We have been looking for the market to retest the spike low from August at 1,867, and then medium-term support at 1,820, the October 2014 low. With several key sectors now also falling to major support levels – notably industrials ‒ and looking vulnerable, we think the risk a major top may be established has risen sharply.

“Below 1,867 should keep the risk lower for price and ‘neckline’ support at 1,832/20. Below here would mark the completion of an important top, turning the core trend bearish. If achieved, we would target 1,738/30 initially – the low for 2014 itself, and the 38.2% retracement of the 2011/2015 uptrend. Although we would expect this to hold at first, a break would be favoured in due course for 1,575/74 – the 38.2% retracement of the entire 2009/2015 bull market. …”

“We’ve obviously already had a significant fall in the stock market, triggered by the breaking down of the lows we saw earlier this year. The big question now is whether this is just a correction in a bull market,” [a member of the Credit Suisse team] told us. In his mind, tumbling past 1,820 would signal that the market move could be something bigger.

On the plus side, a move above 1,953 could help ease selling pressure, the Swiss bank said.

— Excerpt contributed by Roger Crandell

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