The market failed to rebound. What should we do next from a technical perspective?

A brief rebound in U.S. stocks ran into a “clean exit” at a key resistance level, and structural risks in the market are building up.

Both the S&P 500 and Nasdaq indices turned downward from their technical resistance levels. Market makers have a strongly bearish positioning, and liquidity continues to deteriorate—the market is in a fragile critical state, where any additional shock could trigger a rapid selloff.

Specifically, after the S&P 500 touched the 21-day moving average and the upper edge of a downward channel, it then reversed clearly. The Nasdaq’s action is nearly identical: the prior support level has turned into strong resistance. This “rebound failure” sends an important signal— the market’s previously relied-upon technical repair logic is facing a severe test.

Meanwhile, geopolitical risk continues to heat up. Trump said that over the next two to three weeks, the U.S. will carry out extremely harsh actions against Iran. Oil prices have surged sharply, further increasing market uncertainty.

Both break down on the technical front, and the rebound thesis collapses

Both the S&P 500 and Nasdaq indices show a clear “false breakout” pattern at the technical level. According to LSEG Workspace data, after testing the upper edge of the steep downward trend channel and the 21-day moving average, both indices reversed, and the upside momentum that had been viewed as a potential breakout opening quickly dissipated.

The Nasdaq situation is especially worth paying attention to: the prior range support lows have fully flipped into resistance, meaning the conditions required for a structural market repair have not yet been met. From the perspective of technical trading logic, the channel-trading strategy has worked consistently over the past several weeks; this time, again, it was suppressed at the upper edge of the channel, further reinforcing a tactical bias toward the downside.

Two mechanisms reinforce each other, and downside risk builds

Within the current market structure, two key mechanisms are reinforcing one another, making the downside risk not something to underestimate.

According to data from Goldman Sachs, market makers hold around negative $7 billion of Gamma exposure on the S&P 500, which is the second-largest short Gamma reading on record. Under this mechanism, market makers are forced to sell when prices fall and buy when prices rise, which is the opposite of a normal market’s stabilizing mechanism—significantly amplifying the magnitude of price volatility.

At the same time, market liquidity remains at a low level. Goldman Sachs data shows that current lower market depth means that even orders of moderate size may create disproportionate impacts on prices. This factor is often underestimated by the market, and it is also an important reason why abnormal volatility has frequently appeared in recent price action.

VIX cools off, but market stress has not gone away

On the volatility front, the VIX shock from early March has clearly fallen back, but the current reading of 27 still conveys a clear pressure signal. This level is sufficient to maintain a protective sentiment in the market, but it has not yet reached a panic threshold—meaning the market can continue to drift downward slowly without volatility rising sharply.

The hidden concerns in European markets are even more pronounced. The gap between Europe’s volatility index V2X and the VIX has continued to stay at a high level. The latest developments in the Iran situation have further exposed the fragility of European assets. In this round of adjustments in global risk assets, Europe remains relatively weak.

Multiple pressures converge, and the market enters a highly sensitive range

Taking the above factors together, the current market landscape can be summarized into four dimensions: technical rebound failure, market-maker hedging mechanisms amplifying volatility, liquidity gaps magnifying price shocks, and geopolitical risks continuing to spill over externally. With these four stacking together, they form a relatively fragile market structure.

From an execution standpoint, in an environment where market-maker exposure is deeply bearish and liquidity is thin, if the market weakens further, the pace of the decline may be noticeably faster than expected. For position holders, the priority of dynamically adjusting protective positions is rising; for those on the sidelines, this is still not the time to casually bargain-hunt for bargains.

Risk warning and disclaimer

        The market involves risk; investment requires caution. This article does not constitute personal investment advice, and it does not take into account any individual users’ special investment objectives, financial conditions, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are consistent with their specific circumstances. Any investment made on this basis is at your own risk.