The major U.S. stock indices gave back the previous week’s gains and then some last week, due in part to tepid March new home sales and weaker-than-expected Q1 GDP. They were led lower by the tech-heavy Nasdaq 100, which lost 3% and ended April down 5.5% for the year.  

Meanwhile, the benchmark S&P 500 has already fallen 2.2% since peaking on April 20, about a week after my Market Outlook entitled “In The Week Ahead: Start Protecting Your Portfolio Now” discussed the likelihood of a bearish reversal.

From a sector standpoint, last week’s market decline was led by technology (-3%) and health care (-2.9%). Energy and defensive utilities and consumer staples were the only sectors to finish the week in positive territory.

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In last week’s Market Outlook, I pointed out that energy saw the biggest positive percentage change in sector bet-related investor assets over the past one-week and three-month periods, according to Asbury Research’s own ETF asset flows-based metric. Not surprisingly, crude oil prices have also been showing some strength lately, which I will talk about in more detail later in the report.

Nasdaq 100 Meets Initial Downside Target

Last week, I pointed out a bearish “island top” chart pattern in the Nasdaq 100, saying it suggested a near-term peak was in place at the index’s recent highs and targeted a decline back to the 4,302 to 4,232 support zone. 

That support was tested on Friday, as the Nasdaq 100 hit an intraday low of 4,307, a 3.7% decline in just five sessions, before closing the week off 3% at 4,341.

If the index breaks below 4,302 this week, it will warn of a deeper decline to the bottom of the support zone at 4,232.

Apple At Key Inflection Point

I also pointed out last week that Apple’s (Nasdaq: AAPL) inability to rise above major overhead resistance near $111 was a potential canary in the coal mine that warned of upcoming weakness in the tech sector.

AAPL collapsed 12.5% last week to test major underlying support at $92, which represents its August and February lows, before closing the week down 11.3%.

A break below $92 this week would portend more weakness in this tech bellwether, and given its huge market capitalization, in the Nasdaq 100 and S&P 500 as well.

Investor Fear Could Trigger Deeper Decline

I have been warning that investors are especially susceptible to a scare according to the Volatility S&P 500 (VIX), which has been hovering near historic lows around 12 for the past several weeks, indicating extreme investor complacency. A sustained rise above the VIX’s 50-day moving average would be necessary to indicate investors had become fearful enough to fuel a market decline.  

The VIX finished last week at 15.70, just below its 50-day moving average at 15.80.

If we see a sustained rise above 15.80, I expect it will coincide with a decline below $92 in AAPL, which could frighten investors even more.

Potential Bottom in Oil Prices Offers Reason for Hope

In the April 18 Market Outlook, I postured that the inability of major oil-producing countries to reach an agreement on freezing crude oil output could result in oil prices resuming their August 2014 downtrend from major overhead resistance near $44. However, West Texas Intermediate (WTI) crude continued to climb, breaking resistance by closing at $45.96 per barrel on Friday.

Asset prices often bottom when they no longer decline on negative economic/fundamental news, and this could be what is happening right now in the oil market. 

More strength at this major inflection point in crude prices should boost the Market Vectors Oil Services ETF (NYSE: OIH), which I discussed in last week’s report.

Rising oil prices could eventually help the stock market find a tradeable bottom, as well, because WTI crude has been positively correlated to the S&P 500 since October 2015.

Putting It All Together 

The stock market correction I have been expecting since the March 28 Market Outlook, entitled “Time to Put a Defensive Plan in Place,” appears to be under way. The losses may accelerate this week if we see a decline below $92 in tech bellwether Apple and/or a sustained rise above 15.80 in the VIX.

Bigger picture, however, a sustained rise above $44 in WTI crude oil prices would indirectly suggest the recent decline in U.S. equities could provide investors with an even better buying opportunity later this year, if not later this quarter.

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This article originally appeared on Profitable Trading: Correction Appears To Be Under Way