06.04.202610:24 Forex Analysis & Reviews: Market has nowhere to hide

Markets wake up optimistic and go to sleep deeply pessimistic. In March, after posting gains in the first two trading days of the week, the S&P 500 fell by 9% on Thursday and Friday. As a result, the broad index lost 5.1% — better than the global MSCI, which slid by 7.4%, notching the worst performance since 2022. According to Goldman Sachs, hedge funds sold foreign equities at the fastest pace in 13 years.

The theme of US exceptionalism is restraining the S&P 500's slide, especially after an impressive employment gain of 178k in March and the unemployment rate falling to 4.3%. Investors believe that the Middle East conflict will inflict more pain on Europe and Asia than on the United States and therefore continue to hold US stocks. Meanwhile, the temporal pattern of buying in the first two days of the week and selling in the last two gives them an opportunity to profit.

S&P 500 and energy stock performance

Indeed, Monday began with good news. Rumors circulated that Iran, the US, and a group of regional intermediaries are negotiating a 45-day ceasefire. If a truce follows through, it could lead to peace, which would justify optimism. As a result, the S&P 500 could kick off the week with a gap up. Ten of 11 sectors that were heavily sold off could benefit from easing geopolitical tensions. Only energy has been the outperformer.

Investors could not find a place to hide. Previously defensive assets included small-cap stocks with low forward-P/E valuations, but in March, even they were swept up in the sell?off. Initially, markets feared that higher oil prices would accelerate inflation and force central banks to raise or keep interest rates high. Now they are weighing recession risks from overly tight monetary policy.

S&P 500 and Russell performance

The market continues to swing from hot to cold. Rumors of US-Iran talks do not square easily with Donald Trump's threats. The White House owner promised to bomb every power plant and bridge if Iran does not reopen the Strait of Hormuz, saying it would force the country to "live in hell."

Nevertheless, Trump's ultimatum deadlines keep getting pushed out, and the president's coarse rhetoric suggests he is losing patience. The situation is clearly spinning out of control. Not much time remains before his promised 2–3 weeks to end the Middle East conflict. And yet, here we are.

Technically, the daily chart shows that a breakout of fair value at 6,590 followed by a new local high at 6,610 would increase the odds of a continued rally and could justify short-term long positions. Conversely, a retreat from resistance at the 6,635 moving average and the 6,665 pivot level would reopen the case for short entries.