A Second Straight Week of Strong Gains
Last week the major U.S. stock indexes surged 3% to 5%, roughly matching the magnitude of the previous week’s gains. An easing of tensions in the Middle East sent oil prices down about 15%, providing significant lift for stocks.
The market’s back-to-back weekly gains went a long way toward reversing March’s declines. The Nasdaq’s cumulative gain for the two weeks was about 9%, the S&P 500’s was 7%, and the Dow’s was 6%. Year to date through Friday, the S&P 500 and the Dow were essentially flat on a total return basis while the Nasdaq was down about 1%.
Sector Rotation Back Toward Tech
Within the S&P 500, energy was the only sector to post negative returns, while consumer discretionary, communication services, and information technology led gains. U.S. Treasuries also generated positive returns.
Money flowed back into semiconductor stocks on this week’s rebound, and the PHLX Semiconductor Index is trading at fresh all-time highs. Meanwhile, money fled out of software stocks on renewed AI disruption concerns, with the iShares Expanded Tech-Software Select ETF trading at its lowest levels since October 2023.
Ceasefire Hopes Drive the Rally — But Durability Is the Question
The fragile ceasefire between the U.S., Iran, and Israel has sparked hopes for a durable de-escalation, driving oil prices lower and triggering a sharp rebound in equity and bond markets. While volatility has eased, there may well be bumps ahead of the April 21 ceasefire deadline, with significant hurdles to overcome before a peace deal can be reached.
Oil prices remain elevated as investors worry about the durability of the truce, especially amid Israeli military strikes on Lebanon last week and still very limited oil traffic through the Strait of Hormuz.
Gold prices climbed for the second week in a row, regaining more of the ground lost in a mid-March sell-off. On Friday afternoon, gold was trading around $4,800 per ounce, up more than 2% for the week. Nevertheless, the precious metal remained well below the record high of around $5,500 set in late January.
My Technical Read: Real Healing, But Near-Term Overbought
Aside from the Iran war, the indices achieved substantial technical healing this week, which also provides psychological healing for traders. When you are caught in a downtrend making fresh lower lows every week, traders are much less willing to step in and provide bid support. That dynamic has shifted.
The S&P 500 surged above its 200-day SMA on Wednesday on ceasefire talks and experienced subsequent upside follow-through, placing it above the 50-day SMA as well. Even though the RSI remains below 70, I consider it overbought because the RSI has surged from under 30 to 60 in just eight trading days. On a very near-term basis, it would not surprise me to see some consolidation or retracement on Monday and Tuesday.
Key SPX Technical Levels to Watch
Resistance near 6,890-6,900, 6,950, and 6,990-7,002.
Support appears at the 6,740-60 zone, 6,650, 6,535, and 6,473-75.
In any case, as we always do at TheTechTrader.com, we’ll “Trade What We See, Not What We Think.”
— HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com
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