The August sell-off is causing stocks to test some key technical levels, prompting investors to watch where stocks go next. The Dow Jones Industrial Average and S&P 500 fell below their 50-day moving averages last week, a sign that the technical environment for stocks has been deteriorating since early August. This month is already a historically weak season for markets, but investors are also grappling with higher bond yields, weak economic data out of China and the likelihood of higher interest rates for longer. Investors are now watching to see where the S&P 500 goes next. In particular, if the S&P 500 manages to hold above the key 4,200 support level, they believe the broader index can weather any challenges and handle the next leg of a bullish rally. “I think we could go up to 4,200 and I think we'll stop at 4,200,” said Sam Stovall, chief investment strategist at CFRA. .SPX 1Y Mountain S&P 500 1 Year The strategist said this level is a key support as it represents a convergence of multiple market trends. First, he noted that it is a Fibonacci retracement level based on the move from the October 2022 lows to the last month's highs. These levels are used by stock technicians to identify support and resistance levels. For the broader index, too, it would be down about 4% from Friday's close. Second, the 4,200 level represents an earlier area of resistance in February when stocks fell after a rally. The S&P 500 fell to around 3,800 in March before continuing its upward trend. “Old resistance becomes new support or vice versa when we are in a downtrend,” Stovall said. “That's why the level of 4,200 is important. Third, the level is close to the S&P 500's 200-day moving average of 4,132 and close to the uptrendline. For Stovall, a break below 4,200 could mean “things could get really bad” as stocks could be in for a bigger drop after rallying this year. However, the strategist is optimistic that stocks can hold support and actually rally by the end of the year. “We are in the early stages of a new bull market that started on Oct. 12,” Stovall said. “We've progressed fairly quickly and are now in some much-needed digestion of gains. A combination of technical factors suggest the S&P may test the 4,200 level, but may not break well below it.” Of course, not everyone agrees that the S&P 500 can prevail, saying that recent weakness in stocks portends more trouble for US stocks in the future. BTIG's Jonathan Krinsky said 4,200 could represent “meaningful support” for the S&P 500 and a logical point for a bounce. However, he suspects that every step up will come under pressure. “Med term…we see further downtrend as weekly momentum remains negative and there is little support to speak of until ~4200 for the SPX and 318-320 for the SPX [Nasdaq-100]. That would represent a drop of c.8.75% (SPX) and c.17% (QQQ) from their recent highs, but leaves them above their rising 200-day moving averages. “In other words, we believe we're about halfway through this correction, which is a logical step for some consolidation,” Krinsky wrote on Sunday. “In terms of magnitude of a bounce, the SPX 50-day moving average is 4453 and a 50 percent retracement.” “The most recent fall would be 4471. We suspect that somewhere in this zone any upleg should falter,” he added. Meanwhile, Oppenheimer's Ari Wald said over the weekend that he sees 4,300 next as “attractive support” for the S&P 500, followed by 4,200. Wald added, “Long-term positive developments lead us to believe that a streak of seasonal weakness should prove to be an opportunity to participate in an ongoing market rally.” – CNBC's Michael Bloom contributed to the coverage.