The Tell: Bruising stock-market selloff may have cracked the rally’s foundations

Wall Street’s modest recovery on Friday may have some investors hoping that the worst is over, in terms of event risk related to U.S.-North Korea tensions. However, Thursday’s decline may have done structural damage to the integrity of an uncannily buoyant stock market, the kind of hit that could signal further losses ahead.

The recent downdraft, which resulted in the worst weekly decline for the S&P 500 index SPX, +0.13% and the Nasdaq Composite Index SPX, +0.13% since late March, also pushed the indexes below a key technical line in the sand, one tracked by market technicians to gauge weakening momentum.

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