The S&P 500 is at risk of dropping another 5% after the index fell below a key technical level this week, according to Bank of America Corp.’s Michael Hartnett.

The strategist — among the more bearish voices on US stocks — said that now that the S&P 500 had breached 4,200 points, there’s a chance it could continue sliding until it hits the 200-week moving average at 3,941. That level is considered a long-term support line that has halted market routs in the past — with the exception of the dot-com bust in the early 2000s, the financial crisis of 2008 and 2009, and the 2020 Covid pandemic.

The benchmark index closed Thursday at 4,137, stopping just shy of confirming a technical correction. Traders were assessing the move below 4,200 — close to another significant level for the gauge, it’s 200-day moving average — as they tried to determine whether the longer-term trend is higher or lower.

US stocks are in their third month of declines after bond yields soared on worries about a persistently hawkish Federal Reserve. Geopolitical concerns in the Middle East as well as an underwhelming corporate earnings season have dented risk appetite more recently. The technology-heavy Nasdaq 100 confirmed a correction Thursday after dropping more than 10% from its July peak.

Demand for tech stocks remains high, Hartnett wrote in a note. The sector attracted inflows of $2 billion in the week through Oct. 25 — the biggest addition in eight weeks — showing that investors are “buying-the-dip,” the strategist said.

Global stock funds experienced outflows of $2.1 billion, according to the note citing EPFR Global data. Cash funds drew $29.2 billion, while $2.2 billion flowed into bond funds. European funds suffered a 33rd week of outflows at $2 billion.

Hartnett has remained bearish on stocks this year, even as the S&P 500 rallied in the first half.

This article was provided by Bloomberg News.