Will the stock market continue to collapse? Look at this number.

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Was Monday’s massive sell-off indicative of the great market correction demanded by Wall Street? Analysts are watching a key level looking for clues.

The S&P 500 had its worst day in months on Monday, falling 1.7% over fears the real estate giant

Evergrande Group in China

The problems of (ticker: 3333.Hong Kong) may spill over into other markets. Investors are also increasingly uncertain as the Federal Reserve meeting approaches and negotiations over the Congressional budget and debt ceiling continue.

On Friday, the S&P 500 fell below its 50-day moving average, a technical indicator that shows investors are losing faith in the market outlook. The S&P 500 is 3.9% below its all-time high at Monday’s close, its lowest level since mid-June.

But on Monday, the S&P sent another troublesome signal. The index briefly fell below its 100-day moving average of 4,320.

Now the question is whether stocks will rebound quickly or suffer a correction, defined as a 10% drop from a recent high. Frank Cappelleri, chief market technician at Instinet, monitors the 100-day moving average. As the market fell below these key levels, “You haven’t had the demand to buy. [the] volatility, ”he said.

If the S&P 500 falls significantly below the 4230 level with a majority of stocks in the index in the red, watch out for a correction. This would indicate that market participants still see significant risks that are not reflected in stock prices.

“Is it going to be a knife falling to that level?” 1 to 2% decrease? Said Cappelleri. “[The] the chances of an environment of prolonged volatility are higher.

On the flip side, the S&P 500 could experience a rapid pullback if it sees an upward movement, a slight downward movement, or a downward movement where the majority of stocks in the index are rising. Any of these scenarios would be a sign of optimism.

“[The 4,320 level] may encourage some dip buying because the market has been so constant this year, ”Cappelleri said.

Other analysts are also watching. “We place a lot of importance on today’s pricing developments,” Fairlead Strategies founder Katie Stockton wrote on Monday.

Some good news for investors: the index closed above this key level on Monday.

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