Following the S&P 500's largest weekly decline since last November, Wall Street strategists are intensifying their analysis to determine the potential depth of the sell-off as the benchmark index once again tests a key support level that has held for months. For the third time this month, the index has traded below its 100-day moving average, a crucial technical line that has provided support since last May. Currently, investors are shifting capital from overvalued technology stocks into more defensive sectors of the market. On Tuesday, equities experienced significant volatility, managing to erase early losses and close slightly higher.

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, commented, "A decisive break below this support would signal a potential shift towards a more pessimistic market sentiment." He emphasized that a sustained move below the 100-day average would be particularly concerning, given that the index successfully defended this level in November, leading to a rally that culminated in a new all-time high this past January.

The benchmark index is now showing signs of strain, recently fluctuating within a narrow range between approximately 6800 and just under 7000 points. According to a survey of active fund managers by the National Association of Active Investment Managers (NAAII), investor equity allocations have dropped to their lowest level since July of last year. Although the S&P 500 managed to hold its ground on Tuesday, closing up 0.1% at 6843.22, it had earlier dipped to an intraday low of 6775.50. Its 100-day moving average currently sits at 6814.51.

This back-and-forth price action is prompting strategists and technical analysts to scrutinize charts to identify the next potential support zone. Cieszynski identifies a "support cluster" for the S&P 500 between 6,500 and 6,550 points, noting that both the 200-day moving average and the lows from November fall within this range. Matt Maley, Chief Market Strategist at Miller Tabak + Co LLC, also views the combination of the 200-day average and the recent lows around the 6,500 level as a "very important" area to watch if the market declines further. He noted that the 100-day level, which had been "rock solid" for months, is now under threat of breaking.

A significant drag on the S&P 500 has been the weakness in its largest components. The so-called "Magnificent Seven" have declined approximately 7% in 2026, with Amazon.com (AMZN) and Microsoft (MSFT) leading the downturn with double-digit losses. Jonathan Krinsky, Managing Director and Chief Market Technician at BTIG, stated that the group "continues to form a top," putting pressure on the broader index. The sector faces a major test next week with the earnings report from NVIDIA (NVDA).

Market observers at Bank of America see another critical test for the index around the 6,720 level. A break below this point would clarify for technical strategists whether the market is experiencing a sector rotation or the beginning of a genuine weakening trend. Paul Ciana, Global Chief Technical Strategist at Bank of America, said, "It's a tug of war between a bullish and a bearish formation." A drop below 6,720 would complete a "failed breakout" from the bullish pattern.

Conversely, many Wall Street technicians are also monitoring the number of stocks hitting new highs as an indicator that the broader bull trend remains intact. A research note from Roth Capital Partners on Tuesday pointed out that 15% of the constituents in the Russell 3000 index are making new highs, compared to only 8% hitting new lows, despite concerns about artificial intelligence spreading to more sectors. JC O'Hara, Chief Market Technician at Roth, wrote, "While this weakness is painful on an individual stock level, it cannot compete with the momentum provided by internal strength, where new highs are outpacing new lows by two to one."

On the other hand, Ari Wald of Oppenheimer & Co. suggests that the divergence in the net number of companies reaching new highs on a weekly basis "often signals trend exhaustion and a potential reversal." Wald noted that last week, the net number of stocks on the New York Stock Exchange reaching 52-week highs was 263, the highest since November. However, when the S&P 500 reached its peak in January, this figure was only 109. He indicated he would continue to monitor for another breadth warning. The head of technical analysis at Oppenheimer stated, "For the S&P 500, we believe its uptrend remains intact as long as it holds above the 6520 support level."