The S&P 500 has dropped below 3,900. That is a very bearish sign for stocks.


The S&P 500 index on Friday broke below a closely watched support level that could augur a deeper slide, chart watchers warned.

Technical analysts have identified the 3,900 level as the bottom of an important range of support for the large-cap benchmark. The S&P 500 SPX, -0.73% ended Thursday at 3,901.35 as stocks stumbled in the afternoon. It extended losses Friday, falling 1.6% to trade below 3,840 after a stark profit warning from shipping giant — and economic bellwether — FedEx Corp. FDX, -21.49% rattled investors.

The Dow Jones Industrial Average DJIA, -0.39% dropped nearly 400 points, or 1.3%.

Options expiration may have contributed to volatility, analysts said. Friday marks a so-called quadruple witching day, with the expiration of individual stock options, stock-index options, stock-index futures and single-stock futures.

“Index options will expire on the open…, so a lot of that option gamma that has helped to support the market will be gone at the opening,” said Michael Kramer, founder of Mott Capital Management, in a Thursday evening note.

“That means if the sellers show up in force [Friday], there could be enough for the index to finally break that 3,900 support and begin another drop to around 3,835. That is where the next big gap to fill in the market rests,” he wrote.

Market risk “is elevated as long as the index sits below 3,900,” said technical analyst Andrew Adams in a Wednesday note for Saut Strategy, warning that “the deeper we drop the more likely we have begun a new wave to the downside that will take us to lower lows.” A move below 3,900 would be troubling because it would suggest bears had maintained control, he said.

The S&P 500, which has tumbled into a bear market this year, set a closing low for the year at 3,666.77 on June 16.

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