S&P 500 plummets to the brink of 50-day moving average... Will it collapse due to tech stock sell-off?

▲ Bear market, sell-off/AI generated image

The S&P 500 Index (SPX) has fallen to the brink of breaking its 50-day moving average, standing at a critical juncture that will determine whether the U.S. stock market undergoes further correction.

According to MarketWatch on June 25 (local time), the S&P 500 index barely stayed above its critical support level, the 50-day moving average, by less than 1 point at Thursday's market close. Analysis suggests that if this support level breaks, the likelihood of further losses in the U.S. stock market could increase in the coming days to weeks.

Tech-led weakness is already weighing on the broader market. The Nasdaq Composite (COMP) fell below its 50-day moving average earlier this week, and both the S&P 500 and Nasdaq Composite declined for four consecutive days through Thursday. The Nasdaq-100 (NDX), which has a higher concentration of large-cap tech stocks, is also on the verge of breaking the same trendline.

MarketWatch reported that investors might consider expanding defensive strategies now. The 50-day moving average is a key technical indicator for gauging short-term trends, and in bull markets, it has acted as a support level where buying interest re-emerges. Conversely, if that line breaks, the market could interpret it as a sign of weakening trend, beyond a mere correction.

Recently, the U.S. stock market has seen increased volatility as the stable upward trend from April to early June faltered. In particular, the Magnificent Seven large-cap tech stocks, including Microsoft (MSFT), NVIDIA (NVDA), Alphabet (GOOGL), Tesla (TSLA), Amazon (AMZN), Meta Platforms (META), and Apple (AAPL), lost over $3 trillion in market capitalization in June, increasing downward pressure on the index.

However, the entire market has not collapsed unilaterally. The Dow Jones Industrial Average (DJIA) closed up 71.72 points at 51,920.62, marking its second-highest closing price ever. In contrast, the S&P 500 index slightly declined to 7,357.49, and the Nasdaq Composite closed down 0.5% at 25,358.60, clearly indicating fatigue among large-cap tech stocks.

Wall Street's attention is now focused on whether the S&P 500 index can hold its 50-day moving average. If this support level breaks, the tech stock sell-off could spread across the broader market, and a rotation of funds into defensive and value stocks could intensify. The key to a short-term rebound lies in the Magnificent Seven's decline stabilizing and the S&P 500's ability to defend its 50-day moving average.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*