CLSD

By Tomi Kilgore

Falling below 7,500 would lead to a dramatic increase in selling pressure and volatility, a J.P. Morgan strategist says, and that could end in a full-blown correction

The S&P 500 has approached the edge of a technical cliff, which if it falls over could lead to a dramatic increase in volatility.

Amid all the back-and-forth trading the stock market has endured in recent weeks, the S&P 500's uptrend that took it to a record high less than a month ago is still intact - but only barely.

The index has been holding just above what some chart-watchers view as a critical level. Whether the S&P 500 SPX can distance itself from that level with a lasting bounce, or if it falls below it, could determine the outlook for the stock market through the end of the year.

The level in question is the Sept. 16 intraday low at just above 7,500, according to J.P. Morgan technical strategist Jason Hunter. That level stands out on a chart as the outer boundary of the trading range over the past few months that has kept the index on its upward path.

Skeptics may wonder how a simple number on a chart can stop a selloff, or cause it to accelerate if it's surpassed. But they aren't just numbers, they act as signposts for important market events, of which participants can have lasting memories. They can also provide mile markers within a pullback, so investors don't feel like they are running blind.

The reason 7,500 could be considered so important for the S&P 500's short-term outlook is that's where the selloff stopped, on a dime, in mid-September when worries about the AI trade were just starting to feel real. The subsequent bounce lifted the index to a fresh record soon after, but those AI worries have resurfaced, and the index has approached the 7,500 pivot point again.

The S&P 500 rose 0.4% on Tuesday, but closed less than 1% above the 7,500 level.

Just because a support level stopped the selloff once doesn't mean it will again. But for those looking to buy on a dip, why not pick a spot that worked before? And if you're wondering if and when you should throw in the towel, why not do it after the index veers off its upward path by making a lower low?

The S&P 500's performance this year.

"Since the early summer, we have viewed this area as a critical threshold for the market, below which we think selling pressure, volatility and correlation can dramatically increase," wrote Jason Hunter, technical strategist at J.P. Morgan Securities, in a note to clients.

With regard to correlation increasing, Hunter is referring to the tendency of investors, when the market really sells off, to sell everything, so all stocks and sectors move in sync.

The question for investors is, what other signposts are there below 7,500 that might provide the support needed to stop the selling, at least temporarily?

"We believe an S&P 500 Index break below the 7,500 area would lead to a sharp drop to next support at 7,237 to 7,313," for a number of reasons, Hunter wrote.

For one, the 200-day moving average, which many chart watchers use as a guide to the long-term trend, currently extends to about the top of that range. Also, that range marks the support zone defined by the S&P 500's intraday low of 7,237.85 on June 19 and the July 29 intraday low of 7,313.92.

The third reason is a bit more esoteric.

Hunter noted that the 38.2% retracement of the rally off the March 30 low of 6,316.91 and the Oct. 6 record intraday high of 7,844.52 comes in at 7,260.97, which is also within the potential support zone.

The S&P 500 price and its 200-day moving average, with Fibonacci retracement levels and horizontal resistance and support lines.

The 38.2% figure comes from the Fibonacci ratio of 0.618. That ratio is also known as the divine ratio, given its prevalence in natural systems, such as in the spiral of a sea shell, the breeding patterns of rabbits and in certain proportions of the human body. So many chart-watchers believe the Fibonacci ratio also applies to the natural system that is the financial markets.

If the S&P 500 slices through that potential support zone, Hunter believes the 6,900-to-7,100 area "will act as a floor for the market for the fourth quarter."

He noted that level not only includes the highs seen in January and February, but also the 61.8% retracement of the March-low-to-October-high rally.

Also, a 10% decline from the Oct. 6 high of 7,844.52, which Wall Street would define as a "correction," comes in within that area, at 7,060. The last time the S&P 500 entered correction territory was during the "liberation day" tariff panic selloff in March and April 2025.

-Tomi Kilgore

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11-03-26 1630ET