Bulls Against Wall as Seven-Month S&P 500 Trading Range Caves

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Global Rout Wreaks Havoc on U.S. Stocks

The worst drop for American equities in 18 months is setting up the biggest test since October for bulls after the floor caved in under the Standard & Poor's 500 Index.

More than $500 billion was erased as the S&P 500 slid 2.1 percent to 2,035.73 on Thursday, plunging below a level from March that had held as the index's lower boundary for seven months. Biotechnology companies dropped into a correction, down 12 percent from a July high, while chip stocks entered a bear market.

Lines on charts are exerting unusual influence on traders in 2015, a year in which the second-longest bull market since the 1950s has ground to a halt after two years of nearly straight-up advances. Concerns ranging from China to the Federal Reserve contributed to Thursday's retreat, which also sent the S&P 500 more than 2 percent below its 200-day moving average. 

``It's definitely important that we closed below the March lows,'' said Jonathan Krinsky, chief market technician at MKM Holdings LLC. ``Eventually the market needed to correct and for that to happen, the larger-cap stocks needed to get hit. We're finally seeing that happen.'' 

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