The S&P 500 index has fallen below its 200-hour moving average, which is set at 6248.77. It is currently trading at 6242.81, having reached a low of 6214.43. The index is now at 6245. The NASDAQ index had stayed above its 200-hour moving average since April 24. However, it dropped below that level today, falling to 20573 before recovering to 20692. This moving average is an important technical level for the NASDAQ.

Technical Analysis Levels

These technical levels are crucial for short-term analysis. If the NASDAQ drops below 20598 and the S&P 500 falls below 6248.79, it could signal a downward trend. Keep a close eye on these levels for possible changes in market direction. Currently, the market’s bullish trend is losing momentum at a critical point. The S&P 500 has dropped below its 200-hour moving average, a key indicator of short-term trends, while the NASDAQ is struggling to hold its similar level. This break hints that the upward trend we’ve enjoyed since spring may be coming to an end. This weakness is influenced by recent economic data. The latest Consumer Price Index for July came in slightly higher than expected at 3.4%, disrupting the steady drop in inflation we had observed. Additionally, weekly jobless claims have risen for the third week in a row, reaching 242,000, indicating some softening in the labor market. Due to this uncertainty, we’ve seen a notable rise in market volatility. The VIX has surged almost 40% this week and is now trading around 18, its highest level in months. This shows traders are looking to protect themselves against potential price swings in the near future.

Market Strategy and Outlook

In the next few weeks, it may be wise to consider buying put options on major indices like SPY and QQQ to hedge against or profit from a potential decline. Options set to expire in late August or September 2025 can provide a good position for a downturn if the indices fail to reclaim their crucial moving averages. This strategy directly responds to the market’s struggles at these important technical levels. This situation reminds us of the market pullback we saw in late summer 2023. Back then, a long rally ended with a break of key technical levels, leading to a multi-week correction of over 5% in the major indices. We should be ready for a similar scenario to emerge now. Thus, the key levels are set at 6248 for the S&P 500 and 20598 for the NASDAQ. If these indices cannot move back above these marks quickly, our bearish outlook will be reinforced. We will treat any short-term rallies toward these broken support levels as chances to establish new bearish positions. Create your live VT Markets account and start trading now.

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