A Fourth Consecutive Week of Declines
Markets remain on edge as the Iran conflict enters its fourth week, with stocks moving in the opposite direction of the sharp swings in oil prices. Recent attacks on Middle East energy infrastructure triggered the first 5% pullback in the S&P 500 this year, underscoring investor sensitivity to escalating geopolitical risks.
The stock market’s positive early-week momentum didn’t hold, and the major U.S. indexes finished the week down roughly 2%. The market’s fourth negative week in a row left the S&P 500 6.8% below the record high it reached in late January. The Nasdaq was 9.6% below its October 2025 peak, just shy of the 10% threshold for a correction. Both the S&P 500 and Nasdaq added to their yearly losses. Year to date, the SPX is down 5%, while the Nasdaq is off nearly 7%.
Brent crude, the European benchmark for global oil pricing, briefly retested its $120 highs, while WTI, the U.S. benchmark, climbed toward $100. Year to date, oil is up 74%.
How often have market corrections of 10% or more turned into entrenched bear markets?
Turns out, not often. Short periods of pullbacks ranging from 5% to 10% have been more common. While these may feel unsettling, a drop of 5% has occurred on average twice per year, while corrections of 10% or more have happened every 18 months on average.
Gold and Bonds Under Pressure
Precious metals suffered as well. Gold prices dropped nearly 10%, falling for the third week in a row and interrupting a precious metals rally that dates to early 2025. Gold futures were trading around $4,500 per ounce on Friday afternoon, down $1,000 from a record high of more than $5,500 set in late January.
Prices of U.S. government bonds fell for the third week in a row as well, lifting the yield of the 10-year U.S. Treasury to Friday’s close of 4.39%, the highest level in about eight months.
My Technical Read
Set Up for a Spike Down and Possible Sharp Recovery
With the indices closing near their weekly and yearly lows, the setup is there for a spike down follow-through to extreme short-term oversold readings and a subsequent possible sharp recovery.
We’ll be looking for potential deep oversold readings on both the early negative tick reading near the -1,400 to -1,500 level and a possible McClellan Oscillator reading below -200, along with a spike in the VIX volatility index to the high 30s, low 40s, or higher. That index reached over 60 last April at the spike low.
Key technical levels to watch are SPX support near 6,400-6,405 and 6,350-60. Technical resistance appears near 6,620-25, 6,675-83, 6,700-05, and 6,770-75.
In any case, as we always do at TheTechTrader.com, we will “Trade What We See, Not What We Think.”
— HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com
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