Amidst rising international oil prices and heightened concerns over tensions in the Middle East, U.S. stocks faced downward pressure again on Thursday (March 20th). The S&P 500 index breached a key technical level, sparking worries about the potential for further declines.
By the close of trading, the S&P 500 had fallen 0.27% to settle at 6606.49 points. This level not only marked a new low since November last year but also represented the first time it has fallen below its 200-day moving average since May 2023. This moving average is regarded as a key indicator for measuring long-term market trends, and a break below it is typically interpreted as a potential bearish signal.
Market observers pointed out that although the current index is only about 5% below its record high, the internal structure of the market has significantly weakened. Data shows that within the S&P 500, over 80% of stocks in the communication services, consumer discretionary, and technology sectors have entered a downward trend, while approximately 76% of stocks in the financial sector are also underperforming. Simultaneously, the number of advancing stocks is far fewer than those declining, indicating that the market’s overall momentum is waning.
Looking at sentiment indicators, the put/call ratio in the options market continues to climb, reflecting strong risk-averse sentiment among investors. Some analysts suggest this could signal that the market is gradually moving into a “capitulation” phase, characterized by concentrated investor selling of risk assets.
The core pressure currently facing the market still stems from the energy sector. With ongoing geopolitical conflicts in the Middle East keeping Brent and WTI crude oil prices elevated, the market is widely concerned that rising energy costs will push up inflation and weigh on economic growth. This factor is becoming crucial in influencing the market’s near-term direction.
From a technical chart perspective, the downside for the S&P 500 below the 6600-point level now appears open. Institutional investors are closely watching the key support level at 6500 points. A breach of this level could potentially trigger a more widespread panic sell-off. Based on the current trend, the index faces the risk of a 10% correction from its January high of 6978 points, entering a “technical correction” territory, and the possibility of sliding further towards a 20% decline, indicative of a bear market, cannot be ruled out.
However, some viewpoints suggest that large-cap stocks, particularly in the technology sector, could still potentially become a stabilizing force for the market at some point in the future, similar to the rebound seen after the 2022 interest rate hike shock. But in the current environment, investor confidence remains fragile, overall market sentiment is low, and trading is more dependent on changes in macroeconomic factors.
