A spiraling sell-off in technology stocks is pushing the S&P 500 to the brink of a crucial trend line. Traders are scrutinizing charts to determine how much further this key market barometer might fall. On Thursday, the index closed down 1.2% at 6,798.40 points, driven by concerns that the impact of artificial intelligence is spreading to broader markets. Market technicians observed that the index briefly fell below its 100-day moving average, a level around 6,797 that had served as support since May 2025. "The S&P 500 staged a strong rebound from this level last November," noted Matt Maley, Chief Market Strategist at Miller Tabak & Co. "Therefore, a decisive break below it now would trigger some warning signals." He added that for chart watchers, a sustained break below the 100-day moving average would signal a shift in the market trend, which had been steadily climbing since a tariff-induced sell-off bottomed in April 2025. This current sell-off, which has pulled the S&P 500 down approximately 2.6% from its recent peak, showed little sign of abating on Thursday. Weak employment data exacerbated the decline, while primary concerns revolve around how recent AI developments are affecting software company valuations. Alphabet Inc. also joined the downturn following its earnings report. The S&P 500's decline is being amplified by options market makers who are forced to adjust their hedging positions and sell into a falling market, according to SpotGamma. This dynamic, known as the "negative gamma effect," has become more apparent as the selling intensified. "If we remain below 6,900, we believe a market clearing event is a possible outcome and are watching 6,675 as the primary downside support level," wrote its founder, Brent Kochuba, in a client note. Daniel Kirsch, Head of Options at Piper Sandler, stated that the negative gamma effect makes the area below 6,900 a "volatility purgatory" for traders in the coming weeks. He added, "This is the first time in about a week during this downtrend that we've seen genuine hedging demand emerge on the buy-side." From the perspective of Ari Wald, Head of Technical Analysis at Oppenheimer & Co., the next critical level to watch is 6,520. This level represents the index's low from last November and roughly coincides with its 200-day moving average. "As long as it holds above this key support, the index's uptrend should be considered intact," he commented via email. "The market should stabilize once software stocks find a footing. For now, this remains a key area of vulnerability." Wald believes the crucial support zone for the battered iShares Software ETF lies between $74 and $77. This marks a key retracement of the ETF's gains from 2022 to 2025 and aligns with lows seen in 2024 and 2025. Thomas Thornton, Founder of Hedge Fund Telemetry, indicated he is closely monitoring the S&P 500's 6,600 level, which approximates the lows hit last October and November. "If that level breaks, I see potential for a decline towards 5,600 or even 4,800," he said. "Passive fund investors have been buying the dip and might do so again. But if the decline goes deeper and lasts longer, they might eventually hit the 'sell' button."