(Bloomberg) — Wall Street traders are poring over charts to determine how much further the S&P 500 Index might fall as war in the Middle East rages on, with technical analysts noting early signs of bearish momentum.
The S&P 500 fell 0.2% on Tuesday, dropping further below both its 50- and 100-day moving averages. Breaching both indicators illustrates bearish sentiment: the 50-day moving average is more of a short-term trend, while the 100-day moving average is viewed as more medium-term one.
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“It’s often a ‘check engine’ light for investors,” David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, said when discussing the setup. “It suggests that current momentum is weaker than the historical average, shifting the narrative from growth to caution.”
While fundamental factors like valuations provide a good steer for the stock market’s long-term performance, technical charts become in higher demand during periods of market stress. As volatility grips Wall Street and stocks react to just about every geopolitical headline, technical analysts may offer a roadmap for traders looking for important inflection points.
To Wall Street’s technicians, the next milestone for investors to watch is the S&P 500’s 200-day moving average line. It hovers near 6,591, a level that represents a roughly 5% decline from Tuesday’s intraday high and would mark the gauge’s lowest level since its trough in November. Some chart watchers use the 200-day moving average to gauge whether the longer-term trend for stocks is up or down.
To Ari Wald, head of technical analysis at Oppenheimer & Co., the index’s decline below the 50-day moving average at a time when the 200-day support line remains intact signals the gauge is undergoing a correction amid a longer-term uptrend. To him, the setup may create a near-term buying opportunity.
But “if you were to fall below the 200-day moving average, it would be the first breach of the 200-day average since May of last year,” Wald said. “And it would indicate that the trend is incrementally changing,” said Wald, noting that it is something to watch.
While the S&P 500 is still trading within 3% of its January record, beneath the surface trading has been choppy in the stock market that had been flat for the year before the bombing in the Middle East began. The Cboe Volatility Index jumped above 35 earlier this week, the highest level since President Donald Trump’s tariff turmoil in the spring of 2025.