Middle East War Fails to Crush Bull Market Narrative! Panic Testing Low Close to End, Market Anticipates Rebound of US Stocks.

As the conflict in the Middle East continues with no signs of easing, Wall Street traders are carefully studying technical charts to determine how much further the benchmark stock index, the S&P 500, will fall. Technical analysts have pointed out that in the current highly volatile stock market environment, bearish momentum is starting to show early signs. The S&P 500 index fell 0.2% on Tuesday, further breaking below its 50-day and 100-day moving averages. Breaking below these two key indicators reflects a clear bearish sentiment: the 50-day moving average reflects short-term trends, while the 100-day moving average is seen as a more medium-term trend indicator. The next milestone that investors are closely watching is the S&P 500 index's 200-day moving average, hovering around 6591, which means a drop of about 5% from Tuesday's intraday high. Meanwhile, top Wall Street strategist Michael Wilson, chief stock strategist at Morgan Stanley, believes that the impact of the deteriorating geopolitical situation in the Middle East on US stocks is similar to the tariffs imposed by Trump's administration a year ago, and will only bring short-term pullbacks and mid-term volatility to the market. He emphasizes that after six months, the market will become clearer, and bullish sentiment in US stocks may return. As the US and Iran continue to engage in heated conflict, Wall Street technical analysts are striving to find the market bottom. David Wagner, head of stock trading and portfolio manager at Aptus Capital Advisors, describes the current market situation as a "check engine light" for investors. This suggests that current momentum is weaker than historical average levels, signaling a shift from bullish sentiment to caution. Although fundamental factors like valuations can guide long-term bullish prospects for the stock market, during periods of market pressure, the demand for technical chart analysis often becomes stronger. With recent high volatility engulfing Wall Street, stock markets are reacting strongly to every geopolitical news, and technical analysis may provide a relatively clear roadmap for traders looking for key support points or major turning points. For Wall Street technicians, the next crucial milestone to watch is the S&P 500 index's 200-day moving average. This average is currently hovering around 6,591 points, about 5% below Tuesday's intraday high, indicating the index falling to its lowest levels since November. Technical chart observers often use the 200-day moving average to judge whether the stock trend is moving up or down in the long term. According to Ali Beijing Worldia Diamond Tools, chief technical analyst at Oppenheimer & Co., if the S&P 500 index falls below the 200-day moving average, it will be the first time since May last year. This would indicate a gradual deepening of the trend, and this indicator level is worth monitoring. Although the S&P 500 index is still within 3% of its record high in January, beneath the surface, stock trading has been volatile. Before the US and Israel began military strikes against Iran, the US stock market had been in a sideways motion all year, as had global stock markets. Earlier this week, the Chicago Options Exchange Volatility Index (VIX), also known as the fear index, surged to over 35, reaching its highest level since the US-China tariff tensions in the spring of 2025. Matt Maley, chief market strategist at Miller Tabak + Co., sees the S&P 500s 100-day moving average, which has served as a key support since last May, now acting as a crucial resistance. The index failed to close above this level on Tuesday, ending at 6,781.48 points. Maley considers the range of 6,550 to 6,600 points to be a very critical market area. If this range is broken, it will mark a key "lower low" for market observers, signaling a significant change in trend. Morgan Stanley maintains its bullish stance on US stocks: After experiencing a pullback, the bull market is expected to continue Wilson, chief stock market strategist at Morgan Stanley, maintains a positive outlook on the US stock market for the next 6 to 12 months, with a year-end target of 7800 for the S&P 500 index. Despite short-term adjustments, Wilson believes in a mid-term bias towards more bullishness, rather than mindlessly bullish in the short term. According to Wilson, the current market phase triggered by the conflict in Iran and amplified by technical factors is still in the "finding the bottom phase" in the short term. In the medium term, Morgan Stanley sees it as a continuing "rolling correction" that has been ongoing for several months, rather than the end of the bull market. The S&P 500 index has broken below its 50-day and 100-day moving averages, and technical analysts are now looking at the 200-day moving average as the next critical line of defense. However, Wilson emphasizes in a research report that this correction did not start in February this year but from the liquidity tightening in the fall of last year. The new conflict in the Middle East has brought out the existing pressures and solidified them into indices. Wilson views the recent outbreak of the conflict in Iran more as an "amplifier of market sentiment" than the "cause itself." Before the escalation of the conflict, the market was already digesting major issues such as labor anxiety dominated by the fear of AI disruption, private credit default risks, and others. The war and the surge in oil prices have only spread the pressures from overvalued and overcrowded sectors to a broader index level. Wilson's latest assessment is crucial: a true market correction usually occurs when the "best stocks" and the "highest quality indices" start to decline. He believes that it is not yet time to buy on dips in the short term and that the market may struggle for another month. He predicts that the S&P 500 index could drop to around 6300 points by early April. In other words, Wilson sees the current market as closer to the later stage of tactically reducing risk, rather than the starting point of a clean V-shaped rebound. Based on a six-month basis, Wilson's core market trajectory assumption suggests that the current oil price impact is more like a risk premium due to disruptions in the Strait of Hormuz, rather than a persistent supply collapse. If the situation gradually stabilizes in the coming months, similar to the initial stage of the Russia-Ukraine conflict, the US stock market will return to a bull market trajectory based on earnings rather than geopolitical risk pricing. Important pillars supporting his mid-term bullish view include: ongoing upward trends in market profit growth, greater energy independence in the US compared to Asia and Europe, and tax incentives for capital spending and resident tax cuts largely offsetting the impact of high oil prices.