Recent volatility in the U.S. stock market has traders scrutinizing technical charts for clues on where the latest sell-off might pause. Amid doubts over the returns from multibillion-dollar AI investments and persistently high stock valuations, the S&P 500 dropped to 6,720 points on Thursday, marking a two-week low.
Technical analysts suggest that from current levels, the 50-day moving average at 6,665 points will serve as a critical support level. According to analyst Tyler Richey, a breach below this level would signal "technical cracks emerging." Conversely, he noted that a rebound above 6,748.10 points—the 21-day moving average—could reignite risk appetite in the market.
While investors rarely rely solely on technical patterns, chart analysis provides valuable insights into potential market inflection points. With U.S. economic data disrupted due to the government shutdown, the peak earnings season behind us, and lingering uncertainty over the Federal Reserve’s policy direction, technical analysis has gained prominence.
The S&P 500 has declined at least 0.99% in three of the past six trading sessions and is now down 2.5% from its previous all-time high. The CBOE Volatility Index (VIX) has approached 20, a level Richey describes as "a critical turning point."
Thursday’s sell-off intensified after Challenger, Gray & Christmas Inc. reported that October layoffs surged to a 20-year high, driven by AI-related cost-cutting. Additionally, concerns over unsustainable valuations of tech giants have heightened market uncertainty. The index tracking the seven largest tech stocks fell 2%, marking its third drop in six sessions.
Before the 50-day moving average comes into play, analysts are eyeing the psychological 6,700-point level as the next key threshold. Brent Kochuba, founder of SpotGamma, noted that heavy open interest in S&P 500 options at this level could provide near-term support. Large option positions at specific price points often anchor markets as traders hedge against downside risks.
JPMorgan strategists identified 6,740–6,800 points as a significant technical zone for the S&P 500, with broader intermediate-term support at 6,640. A break below this level, according to strategists including Jason Hunter, would signal a clear bearish shift.
Maxwell Grinacoff, head of U.S. equity derivatives research at UBS, observed increased hedging activity over the past month, with the VIX hovering near the critical 20 level since mid-October. Meanwhile, the VXN, measuring expected Nasdaq 100 volatility, climbed toward 25.
With economic data scarce due to the government shutdown and earnings season winding down, investors are turning to private data for guidance. The next potential market catalyst could be Nvidia’s earnings report on November 19.
Grinacoff remarked, "Risk is everywhere, and investors are hedging. I think they’re acutely aware of the market’s growing fragility."
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