Can the S&P 500 Reclaim the All-Time Highs at 3588? Credit Suisse Analysts Think So

Summary:

Increased risk-flows are helping the S&P 500 to continue the recovery, even as Credit Suisse analysts feel the S&P could reclaim 3588.

The S&P 500 index has surged to a higher open for the 3rd straight day of the week, hitting its highest levels since early September. This move is coming on the back of additional risk flows which stem from rising hopes of further stimulus. Markets are hopeful that US lawmakers could at least agree to one or two standalone stimulus packages for ailing industries, even if the comprehensive bill were still a great deal away from being passed.

Yesterday, US President Donald Trump called on the US Congress to pass a $25 billion payroll relief package for the airline industries, after two airlines announced plans to lay off workers and a 3rd reported its first loss in 25 years.

Also boosting sentiment on the day was the New York Federal Reserve’s Nowcast Report, which showed that the NY Fed now predicts Nowcast for Q3 and Q4 to rise to 14.1% and 4.8%. This represents an increase in the Nowcast projections by 0.1% for Q3. That for Q4 remains unchanged.

The S&P 500’s energy index declined by 0.5% after crude oil prices on the day dropped, while the Technology index and Materials index both posted gains of more than 0.7%.

Technical Outlook for S&P 500

Analysts at Credit Suisse are projecting a 3588 high for the S&P 500 index, as they feel that the reverse head and shoulders pattern on the charts above the September highs along with a pullback to the 61.8% retracement from the 3429/44 price level will lead to uptrend resumption.

A look at the daily chart showcases what the analysts at Credit Suisse are projecting. The reverse head and shoulders pattern encompasses the price moves from 8 September till date, with the price candles of 10/11 September and 6 October forming the “shoulders” while the trough of the “”c” wave of the a-b-c corrective wave sequence which follows the 1-2-3-4-5 impulse wave from 14 July to 2 September, forms the head.

The bullish gaps of Thursday and Friday confirm the break of the neckline at 3393.5 and open the door for a measured move towards the 3588.1 all-time high, with 3481.6 and 3528.9 constituting the upside targets that will resist this move.

Only a breakdown of the neckline by declining prices renders this view invalid and opens the door towards downside targets at 3335.5, 3282.2 or 3228.4. The situation remains fluid as the US election draws near.