Stock investors are hovering near a make-or-break level in the market

• The S&P 500 and Nasdaq 100 are hovering near their 200-day moving averages, a key technical support level.
• The 200-day moving average is an important indicator of potential trend reversals in stocks.
• Traders believe an immediate bounceback is needed for stocks to avoid further declines.

The stock market has entered the danger zone as the S&P 500 and Nasdaq 100 hover near their 200-day moving averages.

Both indexes are trading at the key technical support level after a 6% decline in the S&P 500 and a 9% sell-off in the Nasdaq 100 since mid-February.

The 200-day moving average is a closely watched technical indicator that helps identify the long-term direction of a trend.

When securities fall below their 200-day moving average, it sends a warning to traders that the prior uptrend in price could be on the verge of reversing course and establishing a downtrend.

The Nasdaq 100 closed below its 200-day moving average on Thursday for the first time since March 2023, while the S&P 500 tested the level multiple times this week.

As of Friday morning, the S&P 500 is trading at 5,728.90, just a few points below its 200-day moving average of 5,732, while the Nasdaq 100 is trading at 20,056.35, below its 200-day moving average of 20,246.83.

It's a potentially make-or-break moment for the stock market as traders assess the impact of President Donald Trump's tariff policies.

According to technical analyst Katie Stockton of Fairlead Strategies, the S&P 500 needs to stage a decisive bounce above this technical level to prevent further downside.

"Our short-term indicators suggest it will act as a staging ground for a brief oversold bounce," Stockton told clients in a note on Friday. "Nevertheless, a close below 5,783 today would leave a breakdown pending confirmation next Friday."

Adam Turnquist, chief technical strategist at LPL Financial, highlighted in a note this week that an index that equally weights the Magnificent Seven mega-cap tech stocks — Nvidia, Apple, Alphabet, Meta Platforms, Amazon, Microsoft, and Tesla — is also trading at its 200-day moving average.

If it falls below the threshold, it would suggest investors should look elsewhere for leadership in the stock market.

"A violation of the 200-dma would imply that the Mag Seven's leadership status has been revoked," Turnquist said.