"The 'Seven Giants' started out unfavorably in 2026, dragging down the overall market. The S&P 500's key support level is on the verge of being breached."

Notice that after the S&P 500 index recorded its largest weekly decline since November of last year, Wall Street strategists are working hard to analyze how far the benchmark index will fall, as the index is once again testing a support level that has been held for several months. This month, the benchmark index has fallen below its 100-day moving average for the third trading day - a key support line that has been stable since May of last year. Currently, investors are rotating funds from overvalued tech stocks to defensive sectors in the market. On Tuesday, the stock market experienced sharp fluctuations, ultimately closing slightly higher after recovering from early losses. Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, said, "If this support fails, it would indicate that market sentiment may be turning more pessimistic." He pointed out that it would be particularly concerning if the index remains below the 100-day moving average for an extended period, as the index held this line in November and then rebounded all the way to a historic high in January of this year. US stocks test crucial support levels However, the benchmark index is now showing signs of being under pressure, oscillating in a narrow range between around 6,800 and close to 7,000 points recently. According to a survey of active fund managers by the National Association of Active Investment Managers (NAAII), investors' stock holdings have dropped to the lowest level since July of last year. Although the S&P 500 index held ground on Tuesday, closing up 0.1% at 6,843.22 points, it had fallen to a low of 6,775.50 points during trading. In comparison, its 100-day moving average is at 6,814.51 points. This back and forth price movement is prompting strategists and technical analysts to carefully study charts to determine the next support level. Cieszynski believes that there is a "support cluster" between 6,500 and 6,550 points for the S&P 500 index, noting that the 200-day moving average and the low point reached in November fall within this range. Matt Maley, Chief Market Strategist at Miller Tabak + Co LLC, also believes that if the market continues to fall, the combination of the 200-day moving average and the recent low point in the 6,500-point range will be a "very important" observation point. He stated that the 100-day moving average had previously been "rock solid" for several months, but is now facing the threat of breaking. A major drag on the S&P 500 index is the weakness of its weighted stocks. The "Big Seven" have already fallen by about 7% in 2026, with Amazon.com, Inc. (AMZN.US) and Microsoft Corporation (MSFT.US) leading the decline, with double-digit declines. Jonathan Krinsky, Managing Director and Chief Market Technician at BTIG, stated that this sector is "continuing to form a top" and is putting pressure on the S&P 500 index. Next week, when NVIDIA Corporation (NVDA.US) reports earnings, this sector will face a major test. Tug of war Market observers at Bank of America Corp believe that the index faces another key test at the 6,720-point level, which will provide technical strategists with clear indications whether the index is undergoing sector rotation or is truly beginning to weaken. Paul Ciana, Global Chief Technical Strategist at Bank of America Corp, said, "This is a range tug-of-war between bull and bear market forms." Breaking below 6,720 points would confirm the "failure confirmation" of the bull market form. Indeed, many Wall Street technicians are also monitoring the number of stocks hitting new highs in the market, considering it a signal that the bull market trend is still intact. In a research report on Tuesday, Roth Capital Partners pointed out that 15% of members of the Russell 3000 index are hitting new highs, while only 8% are hitting new lows, despite concerns about artificial intelligence spreading to more industries. JC OHara, Chief Market Technician at Roth, wrote, While this weakness is painful at the stock level, it cannot counterbalance the drive provided by internal strength, as the number of stocks reaching new highs is twice that of those reaching new lows. On the other hand, Ali, a technical analysis director at Obenheimer, said that the dispersion of weekly highs among companies often signals trend exhaustion and potential reversals. Obenheimer's analysis found that last week, the number of net stocks hitting 52-week highs on the New York Stock Exchange reached 263, the highest since November, while back in January when the S&P 500 index hit a new high, this number was only 109. He said they will continue to monitor whether another breadth warning will occur. The technical analysis director at Obenheimer stated, For the S&P 500 index, we believe that as long as it remains above the 6,520-point support level, its upward trend remains intact.