War, Inflation – No Problem
Next Challenge – Earnings

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• The ceasefire gave the stock market the “move past the war” catalyst it had spent the prior week preparing for. The next hurdle will be the wave of bank earnings this week.
• A big monthly jump of 0.9% in CPI inflation didn’t phase stocks, bonds, or expectations for Fed rate cuts in 2026, because markets were expecting 1.0%. However, the U. Michigan 1-year inflation expectations jumped to 4.8% vs. expectations of 4.2%.
• After dropping more than 3% below its 200-day moving average, the S&P 500 has closed higher than 1% over the 200-day twice. History’s last 20 such occurrences suggest the recent low is durable.

After intense negotiations over the weekend with Iran, the end result has been an announcement that the U.S. will blockade the Strait of Hormuz.

A few weeks ago, this news would have likely sent the stock market tumbling. Now, however, it will likely be viewed as a little more than a speed bump, as the market races into earnings season.

The market’s message last week was very clearly one that looked through the risks of elevated oil prices and the Iran war, and focused on the risks and benefits of the AI revolution across various sectors of the economy.

Stocks Put The War On The Back Burner

In last week’s Market Outlook, we highlighted the market rotation that was forming a bottom, and economic news that could support a more bullish market narrative.

This was supported by the fact that the bond market had also stopped going down in the face of higher crude prices and other news that would normally put pressure on rates to move higher.

The market was ready to rally before the ceasefire news so the welcome catalyst created a strong rally that held up and followed through in the indexes and several key sectors.

The war’s market bottom is in. Now it’s up to earnings to keep the bull market intact. With earnings taking center stage, the economy, interest rates, and inflation will be the supporting cast of characters.

Wall St. vs. Consumers On Inflation

Everyone is expecting higher oil prices to lead to higher inflation in the near term and Friday’s CPI data proved this to be true.

As you can see in the month-over-month CPI chart below, last month's data jumped significantly.

Shown below, the year-over-year measure also has an accelerating look to it as it jumped to the highest level since early 2024.

If the chart below were of a stock’s price, the technician would surely suggest there is strong support at the 2.5% level, and the bounce suggests more upside ahead and little chance we’ll see the Fed’s 2% target any time soon.

Typically, higher inflation leads to higher interest rates, potentially slower growth, pressure on stock multiples, and more reason for stocks to retreat. If the cause of inflation is consumer demand, then stocks have a justification for moving higher, but that's not the case here.

However, the big monthly jump of 0.9% in CPI inflation didn’t phase stocks, bonds, or expectations for Fed rate cuts in 2026.

The muted reaction by the markets is most likely because:

1. Markets were expecting 1.0%, so the high number was actually not as bad as feared.
2. The primary driver of the inflation was the price of gasoline and as we discussed in last week’s article and as already noted this week, the market seems to be treating higher oil prices as somewhat transitory and manageable even at elevated levels vs. pre-war prices.

Looking at the Fed Funds market’s odds of rate changes, you can see that there were no significant probability changes as a result of any of last week’s news, including the CPI data.

The table below shows the odds data at the end of last week and the week prior. The blue shading shows the rate with the highest probability for the given Fed meeting. The meetings that show any changes are in 2027, and even the odds within the blue boxes did not change meaningfully.

 

The Consumer Disagrees

While the markets seem complacent about inflation, the consumer sees it differently. The University of Michigan Survey of Consumers’ expectations for inflation one year in the future reported a value of 4.8% which is much higher than the 4.2% expected and breaks a long downtrend in expectations.

Is The Bull Market Safely Over The 200-day Moving Average?

The 200-day moving average is viewed by many as the mark of a significant correction. Several weeks ago, we wrote about the changing nature of market behavior when it’s below the 200-day. Breaking below the 200-day is predictably bearish.

Likewise, recovering from being under the 200-day is predictably bullish. You do not, however, want to be too quick to claim the bearish move is over.

Since the market was able to recently close over 1% higher than the 200-day for 2 days, I looked at what history says about the SPY when it breaks the 200-day by at least 3% and then what happens after it recovers with 2 days of closing 1% above the 200-day.

For the discretionary trader with some decent trading rules like our “close and continue” tactic this recovery criteria is very effective. There are a few instances where 1% wasn’t enough to sustain rally, but it is enough for the nimble trader who adapts to a reversal back into negative territory.

It is certainly prudent to wait for markets to recover the 200-day level if you want to avoid the biggest drawdowns. Below, you’ll find the stats of the last 23 occurrences of this pattern.

Before we look at the summary, take note of the following.

• Our recent break and recovery was only a 3.98% drawdown below the 200-day, and it recovered in 8 days, which is tied with the fastest recovery time going back to 1994. The last 8-day recovery fell back under the sell signal within a month.
• There is only 1 instance when the market was negative after 5 days, and it proceeded to be positive in 20 days. And that negative value was only -0.12%. This implies that the next “confirmation” of a sustained rally could be that the market has moved up in the 5 days since its trigger of turning bullish.

The summary statistics below do show the pattern is worth paying attention to.

If you’d like a PDF book of the charts of all 24 events, members of our weekly Free Market Opportunity report newsletter will receive this on Sunday evening 4/12. You can find a link to the Opportunity Report on the home page, www.marketgauge.com.

When you look at the charts, it becomes clear that the markets that break up through the 200-day without quickly retreating tend to lead to substantial gains.  The failures are also quite remarkable. So this is a very tactical trade setup. Use risk management.

 

The Next Obstacle For The Bulls Is Earnings Season.   

Next week, the banks kick off earnings season. Expectations are high, and investors are eager to hear what management has to say about how the war is impacting their outlook.

Below you’ll find a table of major bank announcement dates next week.

The Stars Ranking is our PRIME ranking (1-5) for the technical condition of the trend in 3 different time frames. The short-term (1-5 days) is too short to be relevant for an earnings announcement, but the intermediate-term (2-8 weeks) and the long-term (2-6+ months) are readings that could be helpful.

If the earnings announcement pushes a stock with an intermediate or long-term bullish 4 or 5-star reading, that momentum could follow through. On the other hand, a weak earnings report on a stock with only 2 or three stars could send it much lower.

If you’d like to learn more about the Stars Ranking, join the Opportunity Report for free on our

 

Want Help Making Sure You See What’s Coming?

If you'd like access to the MarketGauge indicators, strategies, automated trading models, and more, contact us.

• For individual traders or those who want access to professional-grade models: marketgauge.com/call, and ask Rob how to join our Active Investing Edge program
• If you’re an asset manager or RIA seeking algorithmic systems: email Ben at [email protected]
• Use Big View (a lot of it is free!)

Best wishes for your trading,

Geoff Bysshe
Co-Founder
(Connect on LinkedIn)

 

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Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The video analysis dives deeper.

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Summary: Markets staged a broad-based risk-on rally with strong gains, improving breadth, leadership from semiconductors and growth, and multiple indicators (internals, volume, risk gauges, global equities, and Bitcoin) flipping bullish—though momentum still faces resistance at declining intermediate trends.

However, conditions are now stretched to near-term overbought levels with volatility compressing and macro inputs (rates, commodities, gold) largely neutral, suggesting the rally may need consolidation before sustaining higher.

Risk On

• Markets put in a strong week, up 3-4.5% on the week with three of the four closing back in bull phases. One concern is that momentum just got back up to its declining 50-Day Moving Average on real motion and remains in a bear phase. (+)
• Sectors were nearly positive across the board, with the exception of IBB which was flat, and every, which came off its highest levels. Semiconductors were up over 11% and consumer discretionary also had a strong week. It was the worst week for oil prices in six years. (+)
• Volume patterns clearly favored risk-on with all indexes having more accumulation days than distribution days. (+)
• Speculative sectors like semiconductors and related countries were the best performers this week. (+)
• The 52-week new high new low ratio had a major reversal and flipped positive with a positive stack and slope. (+)
• The color charts (moving average of stocks above key moving averages) on a short-term basis across all the indexes are flipping to positive bull mode readings with improving long-term readings. (+)
• Risk gauges have flipped fully positive. (+)
• The value vs growth relationship is showing growth is regaining some short-term leadership and improving its phase, while value returned to a bull phase. (+)
• The modern family was strong this week with 5 of the six members up on the week and SMH, KRE, and IWM reclaiming a bullish phase. Semiconductors hit a new all-time high. (+)
• Foreign equities resumed leadership and both emerging and developed markets are in bull phases. (+)
• Bitcoin showed some strength, clearing its 50-Day Moving Average for the first time in several months. (+)
• Seasonal trends are good heading into April for the S&P and Nasdaq, though still weaker for Small Caps. (+)

Neutral

• Market internals surged to overbought levels this week from oversold levels two weeks ago. This could be an overall positive momentum thrust. The NASDAQ is a bit more extreme than the S&P. (=)
• The color charts (moving average of stocks above key moving averages) on a short-term basis across all the indexes have or are flipping to positive bull mode readings. (+)
• Volatility backed off considerably from its peak on March 27th. The Cash Vix is back into a warning phase and testing support. (=)
• Soft commodities eased a bit this week, however, we did get a cross of the 50-Day Moving Average over the 200-Day Moving Average. DBA is lagging the SPY on a short-term basis. (=)
• Gold was up marginally on the week while oil came off its highest levels. (=)
• Rates remained stable this week. (=) 

 

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Actionable Trading Plan

Bias: Lean Risk-On, but tactically managed (not fully committed yet)

• Increase equity exposure incrementally rather than all at once, prioritizing leadership areas (semiconductors, growth, discretionary, and strong foreign markets).
• Avoid laggards (biotech, soft commodities) unless they show clear relative strength improvement.

Execution Framework

• Buy strength on continuation, not weakness—focus on names/sectors holding gains after the sharp rally rather than chasing extended moves.
• Scale in over multiple entries to reduce risk of buying into a short-term overbought condition.
• Favor relative strength leaders making new highs or reclaiming bull phases (SMH-type leadership, IWM/KRE confirmation, Bitcoin above key trend).

Risk Management / Positioning

• Keep position sizes moderate given overbought internals and resistance at declining intermediate momentum.
• Maintain a cash buffer (20–40%) to stay flexible if the rally stalls or reverses.
• If leadership sectors begin to fail broadly (not just pull back), reduce exposure quickly rather than waiting for confirmation.

What to Watch (Decision Triggers)

• Follow-through vs. stall:
• Continued expansion in new highs and strong sector breadth → add exposure.
• Loss of momentum + failed breakouts → shift back toward neutral.
• Leadership health:
• If semis/growth continue leading → stay risk-on.
• If rotation shifts defensively → tighten risk.
• Volatility behavior:
• Stable/declining volatility → supports adding risk.
• Sharp volatility spike → move to defense quickly.

Bottom Line

Participate in the upside, but treat this as an early-stage regime shift with overbought risk—build exposure selectively, stay focused on leaders, and be quick to de-risk if momentum fails.

 

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Keith's Weekly Market Analysis Video