Credit Suisse says this is a bear market rally that’s about to fail right here
The stock market’s rally looks like it is running out of gas, according to Credit Suisse . Managing director David Sneddon said in a note to clients on Tuesday that the rally is showing signs of exhaustion and that the S & P 500 has reached some key technical levels that signal a pullback is coming. “The S & P 500 has extended its recovery back above its 200-week average and we look for strength to our corrective target zone 3900/4000. Our bias remains to view this still as a bear market rally and we look for the rally to fail here … with Breadth measures having unwound their oversold condition and with the Volume picture still seen negative,” the note said. The S & P 500 closed at 3,856.10 on Tuesday . The 200-week moving average is at roughly 3,620. If the rally were to continue in the near-term, the 200-day moving average near 4,100 could be one area of resistance that knocks stocks down, according to Credit Suisse . Moving averages are a favored tool of technical strategists , who monitor whether an index breaks through an average to gauge the strength of a directional move. Wall Street is coming off a strong October , in which the S & P 500 gained 7.99%. The Dow Jones Industrial Average had an even bigger rally, jumping 13.95%. The rally has been fueled in part by an expectation that the Federal Reserve could be nearing the peak of its rate hike cycle. The central bank is expected to raise its benchmark rate by 0.75 of a percentage point on Wednesday, but traders will be looking for a sign that a ” step down ” or even a pause is coming. Credit Suisse has a 3-month forecast for the S & P 500 of 3,500, and a 12-month forecast of 3,650. —CNBC’s Michael Bloom contributed to this story.
