- US stocks sold off once again on Thursday.
- The correction in the S&P 500 index appears to be gaining momentum.
- Meanwhile, the German DAX is moving sideways, and sellers could take over soon.
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U.S. stocks faced a broad selloff on Thursday, as the S&P 500 shed early gains in the trading session and tumbled deeper into a correction.
Investor anxiety remains high, with the CBOE Volatility Index, also known as the "fear index", spiking to its highest level since May.
This drop comes after the first leg of the pullback on Tuesday was seen as a rotation into small caps. However, even the Russell 2000 declined on Thursday, reflecting a broader selloff in stocks.
This sentiment shift comes as the second-quarter earnings season heats up ahead of key tech names set to report next week.
Amid the ongoing correction, let's take a look at the key levels to watch for the S&P 500 as the index tries to find a direction after declining 2 days in a row.
Alongside that, we will also take a look at the technical situation with the German index DAX after ECB's decision to hold rates steady at its latest meeting.
S&P 500: Key Levels to Watch as Index Faces Correction
The S&P 500 has finally entered a long-awaited correction, marking its biggest decline since April. This comes after a year dominated by bullish sentiment, with little opportunity for a significant pullback. The past two trading sessions saw the sharpest decline since April, suggesting the start of a potential correction.
The first major area of concern lies around 5500, where an upward trend line intersects with key support levels. A break below this critical zone at 5400 points could signal serious trouble for buyers and a potential trend reversal. In that scenario, sellers would likely target the 5000 level next.
DAX Could Face Selling Pressure
Since early May, the DAX has been stuck in a consolidation pattern, with its upper limit set near historical highs just below 19,000 points. Given the recent downturn in U.S. markets, a potential scenario for the DAX is a sell-off targeting the lower boundary around the round number of 18,000 points. This aligns with the current negative sentiment gripping the broader market.
If sellers manage to break through this support level, their next target could be 1,000 points lower at 17,000. However, a reversal in sentiment and a continuation of the uptrend could see investors refocus on the psychological barrier of 20,000 points.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.