A Two-Day Winning Streak, But This Is the Real Story to Watch
Don't get too comfortable — this is not a market ready to run. However, there were some encouraging developments as we await the Fed.
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The S&P 500 posted gains for the second consecutive day on Tuesday. That may not sound like much, but context matters. The last time the index strung together back-to-back positive sessions was February 24 and 25. Two weeks of failed bounces and fizzled follow-through make even modest consecutive gains worth noting.
That said, the numbers were not impressive. Monday's 1% gain, followed by Tuesday's 0.25% advance, is the kind of action that keeps investors from getting too comfortable. Breadth came in around 58% positive. There was no urgency, no fear of missing out, no sign that money is rushing to get back into the market. This is stabilization with no indications of acceleration.
The most encouraging development Tuesday was that a rebound in oil prices did not rattle investors. That is a meaningful shift from the pattern of the past two weeks where every oil tick higher produced a wave of selling anxiety.
President Trump continued to hint at progress in the Strait of Hormuz and stated that the war would last "just a couple weeks, not much longer, we're way ahead." There is evidence that suggests the timeline could be more complicated than that, but investors appear to have made a kind of peace with the uncertainty. They are no longer panicking over every setback.
This is likely just the triumph of hope over reality. Things could change very quickly and the volatility we have experienced over the past two weeks is not going to disappear because of two modestly positive sessions.
What Wednesday Brings
The market turns its attention to the Federal Reserve on Wednesday. The policy decision will be followed by a Jerome Powell press conference.
No rate cut is expected and Powell is almost certain to say the Fed is making no decisions until it has more data. The more interesting question is how he characterizes the inflation outlook, given what is happening with energy.
There will be plenty of speculation about the trajectory of oil-driven inflation in the months ahead and that commentary has the potential to move sentiment in either direction. I suspect that the bears will win the inflation argument for now.
Chart Development Is the Real Story
What I am watching most closely right now is not the day-to-day index moves. It is the chart development underneath.
We are getting basing action. Support levels are firming up. Some good technical setups are starting to take shape in individual names. That process does not happen overnight and it requires exactly the kind of quiet, low-panic consolidation we have been seeing the past two days.
This matters because the goal isn’t to time the market perfectly. Nobody does that consistently. The goal is to catch the meat of a strong move when it develops.
You miss the first few percent getting confirmation. You miss the last few percent taking profits. The middle is where the real money gets made. And the basing action happening right now will eventually help set up that middle.
Stay patient and stay prepared.
Have a good evening. I'll see you Wednesday.
Related: Hyundai Is Asia's Stock Star This Year After Nvidia Announcement
At the time of publication, Rev Shark had no positions in any securities mentioned.
