Wolfe Research analysts warn the S&P 500 may drop to 6500 before staging a sustained rebound, despite recent technical support holding at 6780. The firm's analysis suggests current market conditions lack the capitulation signals typically seen at major bottoms, with breadth and volume patterns showing resilience rather than panic.

Analyst Rob Ginsberg noted that while the VIX has spiked to levels seen during fourth-quarter sell-offs, key indicators like the volatility curve haven't inverted as they did during October and November's market troughs. The market has repeatedly tested the 6780 level, with bulls defending this support zone so far.

However, Wolfe Research believes the index may need a deeper decline to reset sentiment and clear out stop-loss orders before a durable recovery can take hold. The firm pointed to pockets of strength in software shares, which closed higher on the day, marking five gains in six sessions. This divergence suggests the broader market weakness may not reflect complete investor capitulation.