Cracks are starting to show beneath the surface of the U.S. stock market, according to The Market Ear’s latest market note released on July 24. The Nasdaq 100 has broken below its 50-day moving average, while the 21-day average has crossed under the 50-day line. The S&P 500, meanwhile, is being compressed into what the note described as a triangle-like structure, and a clear break below 7,500 could open the door to a faster leg lower.
Thursday’s session brought a broad sell-off across major U.S. indexes. The S&P 500 fell 1.2% to 7,408.30, the Nasdaq lost 2.2% to 25,137.69, and the Dow Jones Industrial Average dropped about 507 points. The so-called Magnificent Seven erased roughly $889 billion in market value in one day.
Tech earnings and chart levels are both under pressure
Alphabet and Tesla dropped sharply after earnings, pushing investors to reassess the payoff from AI capital spending. The Market Ear said that if the Nasdaq 100 breaks below 28,500, the market lacks meaningful technical support until the 200-day moving average around 27,000.
That leaves the next few trading sessions especially important for large-cap tech and for the broader market’s near-term structure.
Oil and yields add to the strain
The latest pressure is not coming from earnings alone. Oil jumped on tensions in the Middle East, with U.S. crude rising above $92 and Brent crude briefly breaking above $100. At the same time, the 10-year U.S. Treasury yield climbed to around 4.7%.
The Market Ear said oil is the variable the market may be underestimating the most right now. Equities had previously shown only a limited response to higher crude prices, but a continued move up in oil could put inflation expectations, bond yields and corporate margins under pressure at the same time. In that setup, what has so far looked like an orderly pullback could turn into a more chaotic sell-off in risk assets.
Volatility positioning is sending mixed signals
The report also pointed to volatility positioning as a growing concern. Tail-risk hedging demand remains low overall, VIX ETNs are still seeing redemptions, and asset managers’ long exposure in VIX futures sits at just the 1st percentile.
At the same time, the options market has started to charge more for upside volatility protection. VIX call skew is at the 96th percentile, suggesting some investors are already buying insurance against a sharper rise in volatility.
CTA flows could amplify the next move
Nomura’s Charlie McElligott also warned that CTA trend-following funds could become the next amplifier. Three-month trend signals still support long U.S. equity positioning by CTAs, but that support is weakening as indexes fall.
If the models switch from long to short, potential selling pressure in S&P 500-linked futures could reach about $25.5 billion.
7,500 on the S&P and the 200-day average on the Nasdaq are key levels
Market stress is no longer centered only on Alphabet and Tesla earnings. Oil, yields, key technical levels in tech stocks, CTA positioning and demand for volatility protection are all becoming sensitive at the same time.
Over the next several trading days, whether the S&P 500 can hold the 7,500 area and whether the Nasdaq 100 can avoid sliding toward its 200-day moving average may determine whether this correction remains orderly or deteriorates further.