MARKET ANALYSIS
Here’s What You Need To Know

• The market is finally showing its first real sign of stress after an extremely one-way rally, but the key point is that the pullback is still very controlled given how negative the weekend news flow was.

• Renewed U.S.–Iran tension over the weekend, including the seizure of an Iranian-flagged cargo ship and fresh threats around infrastructure strikes, has pushed oil sharply back higher and forced traders to reassess how much de-escalation was really priced in.

• Even so, equity futures are only modestly lower, which tells you the market is still not prepared to price a full breakdown in negotiations or a return to the worst-case energy shock scenario.

• That resilience matters because after last week’s extremely aggressive move, a deeper flush would have been the more normal reaction if positioning was truly fragile.

• The big concern we still have, however, is the same one we have been flagging throughout this rally: there has still been no meaningful expansion in relative volume.

• That matters because when a move of this magnitude happens without a proper pickup in participation, it usually tells you conviction is lagging price.

• In other words, the rally has been real, but the fuel underneath it has not yet expanded in a way that would make us fully comfortable calling it a high-conviction institutional thrust.

• Oil is the obvious macro pressure point again. With crude snapping higher and the Strait of Hormuz situation deteriorating into the ceasefire expiry window, inflation risk is back in focus immediately.

• At the same time, the pullback in futures is still relatively shallow versus the scale of last week’s rally, which suggests investors still broadly believe the larger path remains toward eventual de-escalation rather than renewed full escalation.

• There is, however, a clear near-term complacency risk here. The market had become very comfortable with the idea that the conflict was moving cleanly toward resolution, and this weekend was a reminder that the entire situation remains highly headline-driven and unstable.

• That is especially important because the rally into highs was already happening on light participation, which meant the move was always more vulnerable to a sharp sentiment reset than the price alone made it look.

• Under the surface, growth is still the area doing the heavy lifting. That remains the main reason the broader tape has held together so well, and unless that leadership breaks, the market can still absorb a lot of macro noise.

• So the message this morning is fairly simple: bulls are still in control of the bigger trend, but the market has become a little too comfortable, and this is the first session in a while where that complacency is being tested properly.

S&P 500

79.52%: over 20 EMA | 59.84%: over 50 EMA | 60.03%: over 200 EMA

• SPDR S&P 500 ETF Trust continues to show the same defining issue: price is advancing, but meaningful volume expansion is still missing.

• On the weekly timeframe, we did at least see a slight improvement, with last week closing at 106% relative volume versus the 20-week average, which gave the breakout more credibility as price pushed through major resistance and briefly tagged near the prior highs, sitting roughly 1.3% off the absolute highs.

• The problem is that the daily structure still looks far less convincing underneath that headline strength.

• Friday’s session came in at only 82% relative volume versus the 20-day average, which remains very low given how aggressive the rally has been.

• That is why, despite the breakout, this still carries the feel of a technical relief move rather than a fully committed institutional expansion.

• A large part of that is because the move continues to be heavily driven by the technology complex — particularly the areas that had become deeply oversold and are now seeing the strongest rebound.

• That same dynamic is what is supporting both the SPY and the Nasdaq underneath the surface.

• We also have to recognise the macro backdrop: this rebound has happened at the same time oil pulled back and held its 20-week moving average, with energy behaving similarly through Energy Select Sector SPDR Fund.

• From our perspective, the healthiest next development would be a pullback toward roughly $700, which would represent about -1.5% downside.

• That would allow price to test whether prior supply has genuinely flipped into support.

• If buyers step in there and hold that level, that is exactly the type of character change we want to see.

• Breadth is now extremely hot, with 80% of S&P 500 stocks above their 20-day moving average, which historically starts to raise the probability of short-term cooling.

S&P 400 Midcap

85.96%: over 20 EMA | 69.92%: over 50 EMA | 63.40%: over 200 EMA

• SPDR S&P MidCap 400 ETF Trust is now showing even more extreme internal extension, with 86% of mid-cap stocks above their 20-day EMA.

• Again, the same concern applies: this is now three straight weeks of higher prices without a convincing weekly volume surge.

• In fact, last week closed at only 67% weekly relative volume, despite printing a 5% weekly range, which is roughly 1.5% above normal expected weekly movement.

• That mismatch between range expansion and weak participation remains problematic.

• We believe a pullback toward 656.42 is increasingly likely, which would also represent roughly -1.5% downside.

• Importantly, that should not be viewed negatively if it happens.

• That level was a major prior distribution zone between early February and early March, so a successful retest would actually strengthen the structure materially.

• With breadth already above 80%, short-term pullbacks become statistically much more normal.

Russell 2000

88.97%: over 20 EMA | 75.29%: over 50 EMA | 62.66%: over 200 EMA

• iShares Russell 2000 ETF is now the most extended major segment in the market internally.

• We have 89% of Russell stocks above their 20-day moving average and 75% above the 50-day moving average, which is exceptionally hot.

• At this point, that tells you very clearly that if you are only now looking for fresh entries, you are late relative to where the easiest asymmetry was available.

• The majority of stocks have already moved.

• The one positive exception was Friday, where IWM did finally print 105% relative volume, helped by the gap-up move.

• However, even there we saw signs of exhaustion later in the session, and that weakness is already beginning to show again pre-market.

• Because of how extended the Russell is, this is where caution matters most.

• The next few sessions are likely more important than the last three weeks because we now need to see how the market digests worsening Middle East headlines after such a stretched advance.

• If price absorbs that and still holds, that would be another powerful signal that buyers remain firmly in control.

• The key tactical point now is simple: the best entries were in early April.

• At this stage, the focus shifts entirely to pullback long entries, not chasing highs.

• The ideal setup is a retracement into a prior breakout level, followed by visible buyer support and renewed expansion.

FOCUSED GROUP
XLP: Defensives Finding A Bottom

• We are now watching defensives closely, particularly Consumer Staples Select Sector SPDR Fund and equal-weight consumer staples via RSP-style sector breadth.

• XLP is beginning to form what looks like a strong bottom around its 50-week moving average, with the 200-day EMA near $81 acting as additional support.

• Structurally, this is becoming increasingly important because the entire sector now looks like it is building a genuine base.

• On the equal-weight side, the same bottoming behaviour is visible, particularly around the 200-week moving average.

• Across both structures, what stands out is a clear multi-week consolidation phase that increasingly resembles a bottoming process.

• That matters because consumer staples are one of the first defensive groups to quietly strengthen when aggressive growth leadership begins needing rest.

• If technology pauses or cools even modestly, staples can rotate higher very quickly.

• We are not calling for a major defensive shift yet, but this is one of the cleanest areas beginning to show structural bottoming underneath the surface.

• The key takeaway is that after nearly a month of basing, the sector now looks materially healthier than it did only a few weeks ago.

• Please also review the Swingly Sunday Report we emailed to you all yesterday, where we broke this sector down in much more detail alongside the broader cross-market picture.