Market rebound failed; what should be done next from a technical perspective?

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The brief rebound in US stocks faced a “clean exit” at critical resistance levels, and structural risks in the market are building up.

The S&P 500 index and the Nasdaq both turned downward at technical resistance, with market makers holding highly bearish positions and liquidity continuing to deteriorate. The market is in a fragile, critical state—any additional shock could trigger a rapid decline.

Specifically, the S&P 500 encountered a clear reversal after touching the 21-day moving average and the upper boundary of the downward channel; the Nasdaq's trend was almost identical, with previous support now turning into strong resistance. This “failed rebound” sends an important signal: the technical repair logic that the market previously relied on is facing a severe test.

Meanwhile, geopolitical risks are steadily rising. Trump said extremely severe strikes against Iran will take place in the next two to three weeks, causing oil prices to surge dramatically and further intensifying market uncertainty.

Technical Breakdown on Both Fronts, Rebound Logic Collapses

The S&P 500 and Nasdaq both clearly display “false breakout” patterns technically. According to LSEG Workspace data, after testing the steep upper boundaries of their downward trend channels and the 21-day moving average, both indexes reversed, with upward momentum previously considered a potential breakout quickly dissipating.

The situation with the Nasdaq is particularly noteworthy: Former support lows throughout the range have fully converted into resistance, indicating that the conditions needed for structural market repair have yet to be met. From a technical trading perspective, the channel trading strategy has continued to work over the past few weeks; this time, the upper boundary again suppressed any upward movement, further reinforcing a bearish operational bias.

Two Mechanisms Reinforce Each Other, Downside Risks Accumulate

In the current market structure, two key mechanisms are reinforcing each other, and downside risks should not be underestimated.

According to Goldman Sachs data, market makers hold about minus $7 billion in Gamma exposure on the S&P 500— the second-largest short Gamma reading on record. Under this mechanism, market makers are forced to sell when the market falls and buy when it rises, which is the opposite of normal market stabilization, significantly amplifying price volatility.

At the same time, market liquidity remains at low levels. Goldman Sachs data show that the current lack of market depth means even moderately sized orders can disproportionately impact prices. This factor is often underestimated and is a key reason for the frequent abnormal swings in recent price trends.

VIX Cools Down, but Market Pressure Remains

On the volatility front, the VIX shock from early March has clearly receded, but the current reading of 27 still sends a clear signal of pressure. This level is enough to maintain protective sentiment in the market, but has not yet reached the panic threshold, meaning the market may continue to decline slowly without a significant spike in volatility.

Concerns in the European market are even more pronounced. The gap between the European volatility index V2X and VIX remains high, and the latest Iranian developments further expose the vulnerability of European assets. In this round of global risk asset adjustments, Europe remains in a relatively weak position.

Multiple Pressures Intertwined, Market Enters Highly Sensitive Zone

Taken together, the current market situation can be summarized in four aspects: failed technical rebound, hedging mechanisms of market makers amplifying volatility, lack of liquidity magnifying price shocks, and ongoing spillover of geopolitical risks. Together, these four elements build a rather fragile market structure.

From an operational perspective, with market maker exposure deeply bearish and liquidity thin, if the market weakens further, the pace of decline may be noticeably faster than expected. For current investors, the priority of dynamically adjusting protective positions is on the rise; for those on the sidelines, now is still not the time to casually call a bottom.

Risk Warning and DisclaimerThe market has risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users' particular investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their circumstances. Investments based on this are at your own risk. ```