By Martin Baccardax
U.S. stocks tested a key technical benchmark this week with the lowest close since early May tied in part to faster inflation pressures, accelerating bets on Federal Reserve rate hikes, and fatigue from the long tech rally that began earlier this year.
Stocks closed at their lowest levels since early May on Wednesday, following one of the toughest five-day stretches in a year that has loped more than 3.3% from the S&P 500 and taken the Nasdaq Composite more than halfway toward correction territory after a series of record highs peaking in early June.
Stocks were firmer in premarket trading Thursday after the S&P 500 tested a technical benchmark Wednesday, breaking below a key market threshold for the first time since the lows of late March.
Bollinger bands, a technical analysis tool named after its creator, John Bollinger, creates three distinct lines over a standard market chart set over a 20-day period. Around 95% of stock market action takes place within the upper and lower bands.
"From a technical perspective, the S&P 500 broke below support from the late May low and filled the 7,273 price gap," said Adam Turnquist, chief technical strategist for LPL Financial.
"Yesterday's close also marked the first close below the lower Bollinger Band since the March 30 low," he added. "Bollinger Band width remains relatively subdued, and when paired with a break below the lower band, it often signals the start of a new directional move."
Other indicators of near-term volatility, such as the Cboe Group's VIX rising past 20 points for the first time in more than two months this week, and directional momentum tools suggesting a bearish trend, has tech analysts on watch this ahead of the $1.8 trillion SpaceX listing that could trigger sharp market reaction over the final 12 trading days of the quarter.
"We remain constructive on the long-term bull market, but mounting technical evidence suggests an increased risk of a deeper pullback," Turnquist added. "Technical damage continues to build across the heavyweight technology sector, while oversold conditions and meaningful support have yet to emerge."
Koen Hoorelbeke, investment and options strategist at Saxo Bank, also noted that a deeper reading of the VIX, a key measure of market volatility, shows clear signs of near-term risks.
An index tracking a nine-day VIX index, which captures volatility through to next week, and the Fed meeting which ends on June 18, is trading more than 5 points north of the benchmark VIX 30-day index. Futures contracts for July and August, meanwhile, are trending higher.
"That's a clean signal that the market is pricing Fed event risk in the most relevant window rather than spreading fear more broadly," he said. "This is more information than the headline VIX alone can provide."
The S&P 500 is now around 4.5% below the all-time high it reached on June 2, with the Nasdaq down more than 7.1%, a level that suggests correction fears have been mounting ahead of debut of SpaceX, which is expected to begin trading Friday.
But, as Jonathan Krinsky, chief market technician at BTIG noted, six of the 11 sectors in the S&P 500, including healthcare, consumer staples and financials, have risen over the same timespan, with tech down around 10%.
"This has essentially been a momentum unwind, with crowded positioning in semis/AI being reduced while underweight areas like defensive/cyclicals are being bought/covered," he said.
But there's a lot more to come.
"At this point our assumption is this is still a positioning unwind, not a regime change, but we don't think it has fully run its course," he added. "As a result, we would suggest you remain seated with your seat belts fastened, as we expect more near-term turbulence."
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 11, 2026 07:05 ET (11:05 GMT)
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