All major U.S. stock indices finished in the red last week, led lower by the small-cap Russell 2000, which lost 2.4% and is the only major U.S. index in negative territory for the year.

#-ad_banner-#The key takeaway heading into this week is that the U.S. stock market is at another near-term decision point: Assuming the market’s larger 2014 advance is still healthy and intact, we should see its September pullback end. Put another way, if U.S. stocks can’t get any traction from their current level, a deeper correction could potentially extend well into October.

Watch Key Support Levels This Week

The first chart displays what is probably the most influential index and price level to watch this week. In the Aug. 25 Market Outlook, I pointed out major overhead resistance in the market-leading Nasdaq 100 (NDX) at the 4,147 September 2000 high, which the index has been testing and holding ever since. Last week’s decline from 4147 has positioned NDX right on top of underlying support at 4,007 to 3,998, which represents its July 24 high and 50-day moving average.

This support is where the index’s larger 2014 advance should aggressively resume from over the next week or so, if its larger bullish trend is still intact. Conversely, a decline below 3,998 would indicate that its 2014 advance has at least temporarily stalled and would clear the way for a deeper decline to at least the next minor level of support at the 3,849 Aug. 6 low, and potentially to major support at the 200-day moving average of 3,736.

Investor Fear Another Key to Market Direction

Although most major U.S. indices, including the Nasdaq 100, are still holding above minor support levels, investors are still feeling nervous. This nervousness can be seen in an elevated CBOE Volatility Index, better known as the VIX or the fear gauge, as shown in the next chart. The red highlights show that a rise in the VIX above its 50-day moving average has coincided with the past two declines in the S&P 500 (upper panel), during the second week of April and then from mid-July through mid-August.

So, in addition to a rebound from underlying support near 4,000 in the Nasdaq 100, a decline back below 13.26 in the VIX would be necessary to indicate that investors are collectively complacent enough to facilitate another leg higher, not only in this particular index, but also in the broader U.S. market that it tends to lead.

Declining Treasury Yields Are Another Concern

In last week’s Market Outlook, I noted that the yield of the 10-year Treasury note had rebounded back above 2.4%. This suggested that the bond market may be betting that a sustainable bottom is in place in long-term U.S. interest rates. I also said that the one key to this would be these yields’ reaction to their 200-day moving average, currently situated at 2.65%.

Over the course of the week, we got a good look at exactly that. The next chart shows that the yield of the 10-year tested and declined from 2.65%, rising to as high as 2.63% before collapsing back to 2.57% by the end of the week.

This rejection of 2.65% sets up a potential retest of 2.40%, which I have been watching all year, first as an initial downside target from 3.00% back in January, and now as the springboard for either a deeper decline down to 2.07% or a rise back to 3.00% as the Fed’s quantitative easing program winds down in October. Moreover, I will view how the bond market — which is typically more prescient and forward looking than the stock market — prices yields between these two key levels at 2.40% and 2.65% as an indirect indication of its expectations for the U.S. economy into year end. Rising yields would be indicative of expected strength, and declining yields would signal expectations for weakness.

Emerging Bottom in Oil Prices?

Crude oil prices have collapsed by almost $15 per barrel, or 14%, between late June and early September, despite geopolitical tensions in both Russia and the Middle East, before stabilizing over the past two weeks. Through the end of last week, some investor sentiment metrics are now suggesting that oil prices may be close to a significant bottom.

The next chart plots the crude oil futures contract daily since 2011 in the upper panel with a daily survey of retail futures trader bullishness on oil prices in the lower panel. These futures traders are typically near- to intermediate-term oriented trend followers, which means that they become the most collectively bullish at market tops and most collectively bearish at market bottoms.

The past five significant bottoms in the price oil coincided with least bullish extremes by these investors, of just 16% bullish or less, as shown by the green vertical highlights between both panels. The highlighted area on the lower right edge of the chart shows that these investors are hovering just above that least bullish extreme again. Although this metric by itself does not necessarily indicate a buying opportunity right now, it does suggest that it’s time to start watching for emerging opportunities in oil-related financial assets.

Putting It All Together

The market-leading Nasdaq 100 begins this week situated just above a key minor support level, from which its 2014 advance should resume if still healthy and intact. However, last week’s rise in the VIX, especially amid declining long-term U.S. interest rates, indicates that the market is still a little too apprehensive to begin a sustainable advance to fresh highs. A sustained move back below 13.26 in the VIX would be necessary to indicate that enough investor fear has abated to resume this year’s bullish trend.

Finally, this is a good time to start watching for a fourth-quarter rise in oil prices to emerge, which, should this occur, would be supportive of a strong fourth-quarter finish for both the U.S. economy and the stock market.

This article originally appeared on ProfitableTrading.com: U.S. Market at Crucial Decision Point — 4 Signs to Watch For​