LIVE MARKETS-J.P. Morgan urges caution as S&P 500 tests key support levels

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J.P. MORGAN URGES CAUTION AS S&P 500 TESTS KEY SUPPORT LEVELS

J.P. Morgan's technical strategist, Jason Hunter, says the S&P 500 .SPX is testing key price levels, leaving US equities vulnerable to a sharp shift if the index breaks below 7500.

"We maintain a cautious near-term equity stance and favor defensive positioning until the (price) charts show either a bottoming process or capitulation," Hunter says in a note on Monday.

The S&P 500 has broken below the 7,600 level and tested 7,507, a key support level that marked the low of its September trading range, he notes.

"Since the early summer, we have viewed this area as a critical threshold for the market, below which, we think selling pressure, volatility, and correlation can dramatically increase."

Adding to the pressure, recent earnings reports from big technology-related companies including Alphabet GOOGL.O and Intel INTC.O have increased concerns over the massive investments being made in AI and the uncertainty around when those expenditures will begin generating meaningful returns. That led to a selloff in October.

The S&P 500 ended October down 0.9%, while the Nasdaq .IXIC posted its biggest monthly decline since March 2025.

An S&P 500 break below the 7,500 area could trigger a sharp decline toward the next support zone at 7,237-7,313, with the 6,900-7,100 range likely serving as a floor for the market in the fourth quarter if that support fails, according to J.P. Morgan estimates.

"Rotation has cushioned index drawdowns and kept sentiment from reaching bearish extremes," Hunter says.

Cyclicals, notably materials, financials, and consumer discretionary, are proving more resilient than anticipated despite weak external confirmation, he adds.

Hunter sees no sign of bullish exhaustion in those groups yet, but says that downside reversals there could bring a sharp rise in broad selling pressure.

(Joel Jose)

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