Here's what chart analysts see happening next with the market sell-off and why all eyes are on Apple

Published Thu, May 13 20216:23 AM EDTUpdated Thu, May 13 20218:29 AM EDT

Patti Domm @in/patti-domm-9224884/@pattidomm

After Wednesday's sharp sell-off, chart strategists say the stock market looks close to reaching a near-term low, but whether it sticks depends on dip buyers coming in soon. The technical signals are mixed, with some of the riskiest names trading below key levels. That would include the ARK Innovation ETF, down 3.7% Wednesday. But also, Apple was sending a warning when it fell below its 200-day moving average for the first time in a year. The S & P 500 has held above the 50-day moving average, a widely watched level that has acted as support three times this year already. It was off 2.1% to 4,063 Wednesday, 13 points above the 50-day. "All those times led to bounces soon thereafter, and so I think people are looking at that," said Frank Cappelleri, executive director at Instinet. "What I think is this is going to provide a tradeable bounce. In the very short term, there's been enough short-term damage to make a case that maybe a tradeable low could be imminent," he said. But Apple's decline below the 200-day may be a signal of more trouble ahead for the tech bellwether and the market, if it doesn't rally back above it soon, analysts said. Apple closed at $122.77 Wednesday, just below the 200-day at $122.96. The 200-day — the average closing price over the last 200 trading days — is viewed as a key level that if broken, would signal negative price action. Katie Stockton, founder of Fairlead Strategies, said another negative for Apple is the $120 level, which would complete a head and shoulders top, a negative chart formation. "Obviously we do not want that. The implication would carry over to the major indices of which it is a major constituent," she said. Stockton said she is watching the early action Thursday to see if dip buyers come in and support the market. 'If the buyers don't come ... I'd say that's even more concerning. That would show a nonreaction to support levels. That would show a nonreaction to oversold readings," she said. Ari Wald, technical strategist at Oppenheimer, said a bigger support level for Apple could be its March low at $119. "We'll see if it can defend support or is there something more menacing going on," he said. "It is a large weighting in the S & P 500, so it could be a headwind," he said. But he said the stock market's strength could help Apple. "I think a strong stock market could help keep Apple afloat." Wald said some beaten-down stocks have been able to hold their ground. Cloudflare , for instance, reversed above its 200-day moving average Tuesday. Cloud stocks have been hard hit, with many down 20% or more. Cloudflare closed at $69.45, well below its 52-week high of $95.77. Wald also said the market seems like it is close to finding a bottom. "What would market a buyable pullback, we're probably getting close to that threshold," he said. Stockton said her own indicators suggest a near-term bottom is close, but she sees only a few days of stabilization before the market risks another downdraft. The S & P 500 is down 4% for the week. Sam Stovall, chief investment strategist at CFRA, said he expects to see investors buying the dip, as they tried to do on Tuesday. "I think it might be too early to say we're ready for a correction. We need to have the bulls battle back a little it," said Stovall. "If they end up failing, then we'll say 'OK, we have to go deeper before this is done.'" Stovall said there could be several "buy-the-dip failures" before investors become concerned. Stovall said a stock at its 200-day like Apple could be an opportunity. "If you're looking at something that 's kissing its 200-day, that could represent a nice near-term buying opportunity," he said.

Traders working at the New York Stock Exchange (NYSE), today, Wednesday, April 21, 2021.

Source: NYSE

After Wednesday's sharp sell-off, chart strategists say the stock market looks close to reaching a near-term low, but whether it sticks depends on dip buyers coming in soon.

The technical signals are mixed, with some of the riskiest names trading below key levels. That would include the ARK Innovation ETF, down 3.7% Wednesday. But also, Apple was sending a warning when it fell below its 200-day moving average for the first time in a year.

The S&P 500 has held above the 50-day moving average, a widely watched level that has acted as support three times this year already. It was off 2.1% to 4,063 Wednesday, 13 points above the 50-day.