Economists at Credit Suisse expect S&P 500 to correct lower with daily and weekly momentum divergences now in place.

Break above the 4,637 high needed to alleviate thoughts of a correction

With daily and weekly RSI momentum now negative and with a bearish ‘key-day reversal’ in place, we maintain our call to look for a correction lower. 

We look for further weakness to support at 4,448/4,439 next, then the lower end of the uptrend channel, now at 4,403. Whilst we suspect we may see an attempt to hold here we are biased to a break here also for a decline to what we see as more important support at the 38.2% retracement of the March/July rally and late June low at 4,328/4,302, where we would look for a fresh floor.

Above the 4,637 high is seen needed to alleviate thoughts of a correction and instead reassert the uptrend for a retest of the channel top, now seen at 4,674 and eventually the 4,819 record high.