S&P 500 at Risk of Dropping Below 3900, Next Support at 3810

By Senad Karaahmetovic

Stephen Suttmeier, Bank of America technical strategist, has reflected on the technical aspect of the after the index bounced off support in the low 3900s.

Last week, Suttmeier warned that the S&P 500 may drop to the low 3900s to complete the head and shoulders pattern. He now notes that “tactical sentiment from the 5-day put/call and 3-month vs VIX suggests angst and not capitulation.”

Moreover, historically poor performance in September could mean that 3900 won’t hold again, with the bears eyeing a move to 3810 in that case.

“The late June into mid July lows offer the next support at 3738-3712, but a break below the 61.8% retracement at 3899.84 would increase the risk for a full retracement back to the June YTD low at 3636. The tactical pattern on the SPX remains weak below 4015-4043, which is nearby chart resistance and the 50-day and 100-day moving averages (MAs). Above 4015-4043 is needed to suggest a stronger tactical rally,” Suttmeier further explained in a client note.

However, the technical strategist also notes that some SPX stocks are in the “deeply oversold” territory, hence further downside may be limited from that point of view.