S&P 500 Index: Another potential reversal pattern reinforces solid floor at 3428 – Credit Suisse

S&P 500 posted another potentially bullish “inverted hammer” candlestick reversal on Wednesday, which reinforces the conviction that the “neckline” to its “head & shoulders” base and the 38.2% retracement of the recent recovery at 3428/18 will hold for a turn back higher.

More:

• S&P 500 Index: Current 3100-3588 trading range to stay for a while – Morgan Stanley

• S&P 500 Index to move back to the 200-DMA at 3125 as the correction is not over – Morgan Stanley

Key quotes

“The S&P 500 completed another potentially bullish ‘inverted hammer’ candlestick reversal on Wednesday above the ‘neckline’ to its recently completed base at 3428/27 and the 38.2% retracement of the recent recovery at 3420/18. Yet another potential reversal pattern reinforces our view that 3428/18 will provide a solid floor for the uptrend to resume.” 

“Resistance stays at 3477, above which would bullishly confirm yesterday’s session for strength back to 3516/18, then 3550, above which would trigger a move back to the 3588/95 high, which is also the upper end of its ‘typical’ extreme (15% above the 200-day average). Whilst this should clearly be respected, we look for a break in due course, with our ‘measured base objective’ at 3653.” 

“Below 3428/18 would throw a serious question mark over the base, with support seen at 3399 next, the 63-day average. Below here would turn the risks back lower within the range and suggest further consolidation.”