The S&P 500 has once again touched a key support level that has held for months following its largest weekly decline since last November, prompting Wall Street strategists to assess how much further the benchmark index could fall. This month marks the third time the index has dipped below its 100-day moving average, a crucial support line that has held since last May. Investors are shifting away from high-value technology stocks towards more defensive sectors. On Tuesday, the market experienced significant volatility, recovering from early losses to close slightly higher.

A chief market strategist noted that a failure of this support level could indicate a shift towards more pessimistic market sentiment. He pointed out that the index held this average in November before rallying to a record high in January, making a sustained break below it particularly concerning. Currently, the benchmark shows signs of stress, recently trading in a narrow range between approximately 6800 and just under 7000 points. A survey from the National Association of Active Investment Managers shows that investors' equity allocations have dropped to their lowest level since last July.

Although the S&P 500 managed to hold support again on Tuesday, closing up 0.1% at 6843.22, it fell to an intraday low of 6775.50, with the 100-day moving average standing at 6814.51. This volatile trading has led strategists and technical analysts to scrutinize charts for the next level of support. One strategist identified the next strong support for the S&P 500 in the 6500–6550 range, which includes the 200-day moving average and the low from last November.

Another chief market strategist stated that if the market declines further, the 200-day moving average near the 6500 level, combined with recent lows, would be a "very critical" level to watch. He remarked that the 100-day moving average has been "rock solid" for months but is now at risk of failing. The primary drag on the S&P 500 has been weakness in its heavyweight components. Since the start of 2026, the "Magnificent Seven" have fallen approximately 7% collectively, with Amazon and Microsoft posting double-digit declines. A chief technical strategist described the group as "continuing to build a top," which is weighing on the S&P 500.

Nvidia's earnings report next week will serve as a significant test for these leading stocks. Market observers from another firm believe another key test for the index lies at the 6720 level, which would help technical strategists determine if the market is merely experiencing sector rotation or genuinely beginning to weaken. A global chief technical strategist described the situation as a "tug of war between bullish and bearish patterns," noting that a break below 6720 would signify a complete failure of the bullish formation.

Many Wall Street technical analysts are also monitoring the number of stocks hitting new highs to gauge the health of the upward trend. A report on Tuesday noted that within the Russell 3000 index, 15% of components reached new 52-week highs while 8% hit new lows, even as more sectors face pressure from AI-related concerns. A chief technical strategist wrote that while weakness at the individual stock level is painful, it is outweighed by the underlying strength in the market, as the number of new highs is double that of new lows.

Conversely, another analyst suggested that the weekly change in the difference between the number of companies hitting new highs and new lows often signals trend exhaustion and a potential reversal. He observed that the net number of New York Stock Exchange stocks hitting 52-week highs reached 263 last week, the highest since last November. This figure was only 109 when the S&P 500 hit its high in January. His team will continue to monitor market breadth signals. The head of technical analysis at the firm concluded that for the S&P 500, the upward trend remains intact as long as it holds above the 6520 support level.