While recent sessions have seen the S&P 500 and Nasdaq hitting record levels, the immediate outlook is shaped by high oil prices and the ongoing “higher-for-longer” interest rate narrative. This narrative is not going away, plus the supply chain disruptions, there are stories of food and petrol shortages coming soon. The S&P 500 is at new all-time highs because the majority of investors don’t try to time the market, they see a bull market in the next year or two and they buy as soon as there are signs the current oil shock is ending. The ceasefire in Iran and the drop in the oil price was enough to push the S&P 500 to new highs but history suggests that the correction in the stock market is not over.
A corrective waves is proportionate in time and magnitude to the previous advance, if a rally last a year the correction will last more that four weeks. Therefore the new high in the S&P 500 is still seen as a pause in the downtrend. The earnings season is also helping the S&P 500, companies earnings will probably beat estimates in a transition period where AI improves margins. The FTSE 100 is still below its all-time high, the rally can be labelled wave X of a downward double zigzag [W,X,Y].