Technicals are leading while fundamentals lag, as global indices erase Middle East conflict losses, even as US-Iran negotiations remain ongoing and macro risks persist.
Global equity markets have rebounded sharply, over 8% from March 2026 lows, despite elevated crude oil prices and rising inflation. This reinforces a key theme for Q2: markets react to expectations, not current fundamentals, keeping the focus on price action rather than headlines.
Rather than revisiting geopolitical developments around the Strait of Hormuz, the focus remains on price behavior. This is a lesson that continues to repeat itself, extreme headlines often distort market direction and trigger emotional biases, while price action provides clearer signals.
US Indices Outlook: Nasdaq – SPX – Dow Jones – Log Scale
Source: Trading view
Major US indices, along with US bank stocks, are holding near the 0.236–0.272 Fibonacci extensions of the uptrend spanning April 2025 to March 2026, reinforcing the broader bullish structure.
Short-term headwinds may still emerge with the start of earnings season amid a fragile macro environment. US CPI has risen to 3.3%—its fastest pace since 2005—while Eurozone inflation is back above its 2% target. Crude oil remains elevated above $90 despite easing from recent highs. By fundamental measures, the environment remains challenging.
However, markets are not trading current conditions, they are trading expectations.
Bullish Levels for Indices
- Nasdaq: Above 25,500–25,800
- Dow Jones: Above 48,500–48,800
- S&P 500: Above 6,920
Bearish Levels
- Nasdaq: 24,600 → 24,200 → 23,800
- S&P 500: 6,600 → 6,530
- Dow Jones: 46,800 → 46,200
With no new shocks and positioning previously stretched to the downside, markets have repriced toward a more balanced outlook, often a signal that sentiment has bottomed.
CNN Fear and Greed Index
Source: CNN
Sentiment has rebounded from extreme fear, though it remains below neutral levels. This pattern is not new. Similar to April 2025, the tariff rhetoric coincided with market lows, reinforcing a core Dow Theory principle: markets discount information ahead of time. Once risks are priced in, price action begins to lead.
Outlook: Balancing Risks and Trend Continuation
Inflation is likely to remain elevated in the coming months, central banks are expected to stay cautious, and geopolitical risks remain unresolved. Energy markets continue to carry a geopolitical premium.
However, unless these risks re-accelerate, markets are likely to continue along the current path—stabilization within the primary bull trend, with short-term drawdowns still possible.
Crude Oil Price Outlook: 2 Week Time Frame – Log Scale
Source: Trading view
Crude oil is showing early signs of a bearish reversal, with double rejections near the $115 zone, bearish engulfing patterns, and stabilization below $100. This creates a delicate balance, with prices easing nearly 17% from war highs, yet still up more than 50% from yearly lows.
Upper Range (Strength Continuation)
Price remains above 2023 highs, with weekly closes holding above the $88 zone. A move above $110–$118 could open the path toward $135, $145, and $157–160.
Middle Range (Stabilization Zone)
A move below $84 may initially find support, but a confirmed break could expose downside toward $82 and $74, aligning with previous conflict highs.
Lower Range (Extended Weakness)
A weekly close below $74 could trigger a move toward the $60 zone, signaling a return to broader consolidation in line with policy normalization trends.
With price action increasingly driven by momentum and expectations, it remains essential to confirm moves through higher time frame closes. This helps filter out headline-driven noise and avoid common market traps.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
