The Fear and Greed Index from CNN Business has dropped to 22, mirroring December’s lows, indicating extreme fear in US stock markets. Historically, this level can signal a buying opportunity, but recent trends suggest caution due to potential market volatility.

The S&P 500 fell below 6000 at the start of the week, failing to push past its 50-day moving average. A slip below 5900 could signal a larger sell-off across equity markets, with further risk if it drops below the 200-day moving average at 5750.

In addition, the Nasdaq100 and Dow Jones have formed double tops, signalling possible trend reversals. Despite this, a typical response would be a rebound towards the upper boundary above 6600, aided by the VIX remaining below 20, which generally indicates a stable market environment.

The drop in sentiment, as measured by the Fear and Greed Index, suggests that investors are becoming wary. Historically, such low readings have often been followed by recoveries, but recent market behaviour demands a more measured approach. When uncertainty rises, it’s easy to look for past patterns, but they don’t always repeat in the same way.

A key concern is that the S&P 500 is struggling to find support. Having dipped under 6000, its inability to reclaim the 50-day moving average suggests that upward momentum is fading. If 5900 fails to hold, selling pressure might intensify, especially as traders watch the 200-day moving average around 5750. A break below that level would indicate a much broader shift in sentiment, forcing both long-term investors and short-term traders to rethink their positions.

At the same time, we must acknowledge the patterns emerging in other indices. The double tops seen in both the Nasdaq100 and Dow Jones signal that they are testing key resistance points. Such formations often suggest the end of an upward phase, though markets do not always react immediately. A brief rally towards resistance near 6600 is still very much in play, especially given that the VIX remains subdued. When volatility stays low, traders tend to assume that corrections will be limited rather than prolonged.

Over the coming weeks, much depends on whether these levels are respected or broken decisively. If buyers step in near current support zones, momentum traders may look for another push higher. Conversely, a failure to hold could bring more defensive positioning, with derivatives traders adjusting their exposure accordingly. The next moves will not be determined by technical factors alone, but they provide a strong foundation for understanding what could unfold.