In the last three weeks, we have seen a major recovery for US – and indeed global – markets, although it was the major Wall Street indices stealing the show. The S&P 500 and Nasdaq both hit new highs after a massive, and sudden recovery. Risk appetite continued to hold up well through the first half of Friday’s session, as European markets closed the gap with their US counterparts with oil prices easing lower again. Traders are continuing to price in the possibility of a permanent ceasefire in the Middle East and expect the flows of oil through the Strait of Hormuz to re-open as a result. Rate cut expectations from the Fed are coming back and earnings have so far been good. In other words, investors have refocused on the broader macro picture and underlying fundamentals and away from geopolitics. Unless there’s a meaningful re-escalation in tensions involving Iran, something that would likely send oil prices sharply higher again, the near-term bias for equities still leans to the upside. Against this backdrop, our S&P 500 outlook remains positive while the index continues to make new highs and higher lows.
What’s driving the rally?
It’s a slightly surprising backdrop when you think about it. Only a couple of weeks ago, this kind of setup would have seemed unlikely. Concerns around the Strait of Hormuz haven’t fully gone away, Brent crude is still hovering above $95 a barrel, and yet equities continue to grind higher.
From a market perspective, the absence of further escalation in the Persian Gulf has effectively been taken as a green light. There’s a growing sense of cautious optimism, particularly around the possibility of a lasting ceasefire, and that’s helped underpin sentiment.
Earnings are also doing a fair bit of the heavy lifting. We’re in the thick of the reporting season, and so far, results have been solid. The major banks have delivered strong trading revenues, supported by both fixed income and equities desks. Meanwhile, the tech sector remains central to the story, with earnings expectations being nudged higher—something that continues to fuel confidence in the broader rally.
The AI narrative, which has been a key driver for some time now, also remains intact despite the geopolitical backdrop.
S&P 500 outlook: Technical picture still constructive
The S&P 500 chart is still pointing higher after the index closed above the key 7,000 level for the second consecutive sessions, marking a fresh all-time highs in the process, and clearing the previous January 2026 peak of 7,013.
From a technical point of view, therefore, the S&P 500 outlook remains bullish, even if momentum over the past couple of sessions have driven some of the oscillators to overbought levels. Still, there may be enough juice left in the tank to carry the market to even more fresh record highs today.
With the RSI on the daily chart edging past the 70 mark, this may leave the market vulnerable to a bit of near-term profit-taking. Even so, there’s scope for further upside as overbought does not automatically mean selling pressure if coming. If anything, the RSI at these levels is a reflection of the strong bullish trend. Only a confirmed reversal signal would validate the RSI warning of a correction.
Key levels to watch
The next area of interest on the topside comes in around 7,205, which aligns with the 127.2% Fibonacci extension of the move down from the January high. Ahead of that we got a couple of round handles like 7,100 and 7,200 to watch.
On the downside, initial support is now seen around the 7,000-7,013 area, which should act as a first line of defence. Below that, 6,970 comes into view. If we see a deeper pullback, then 6,890 and 6,847 are the next levels to keep an eye on.
With more big-name tech earnings still to come, there’s plenty on the calendar that could influence direction in the weeks ahead. For the time being, though, the path of least resistance still appears to be higher, and the broader tone remains constructive.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
