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Despite the rally, investor sentiment remains remarkably bearish.
Leadership is shifting back to growth as AI-related stocks break out.
Lockout Rally Makes History
If you have been monitoring equity markets for the past few weeks, you have just witnessed Wall Street history:
“The last 110 days have been unlike any 10-day period in the market since 1950. The S&P 500 is up 9.8% in 10 days, which is in the 99.7th percentile of all 10-day returns. Since 1950, there have been 20 instances in which the stock market rose this much in 10 days. Over the next 12 months, returns averaged 19% with 17 up and 3 down years.” ~ The Market Ear (@themarketear)
What is Causing the Market’s Strength?
The U.S stock market has added a mind-boggling $7 trillion in market cap in the last 16 days alone after a complete V-shaped recovery from the Iran war sell-off. So, what caused the rapid rebound? Investors assumed the worst for the Iran war and got extremely negative from a positioning and sentiment perspective. For instance, as I wrote in my March 31st piece “Is the War Over? If so, Bears are Trapped,” the put/call ratio was more extreme than the 2025 Tariff tantrum, and sentiment indicators showed more bears than bulls. Then, in classic fashion, President Trump surprised markets with his “Shock and bore” approach, threatening to “end a civilization” but instead leveraging his extreme rhetoric to get Iran to the negotiating table.
Meanwhile, despite the rip-roaring rally and the fact that U.S. stocks are at all-time highs, investors remain skeptical. For example, bears still outweigh bulls according to the AAII Sentiment Survey.
Image Source: AAII
Additionally, retail % of gross volumes is now at levels last seen pre-COVID.
Image Source: Morgan Stanley
Strength Begets Strength
Historically, consistent green sessions for the Nasdaq have led to massive forward returns. When the NASDAQ is up for 12 consecutive days, similar streaks have led to finish higher 1 year later 100% of the time, with an average gain of +20%. Additionally, when you break it down further to April, the returns get even more bullish. Since 1928, when the S&P 500 is up 5% or more in the first 15 days of April, the market is up 31.9% on average for the rest of the year.
Seasonality: The Presidential Cycle
The recent bout of volatility is the norm for the 4-year Presidential seasonality cycle. Although volatility could return to markets before the midterm elections, the strongest part of the cycle looms.
Image Source: Nautilus
AI Stocks Emerge from Bases
Price action among leading stocks is the best market “tell” for investors. Over the past few weeks, several AI-related stocks have emerged from multi-month base structures including Nebius ((NBIS - Free Report) ), IREN ((IREN - Free Report) ), Advanced Micro Devices ((AMD - Free Report) ),Bloom Energy ((BE - Free Report) ), and SK Telecom ((SKM - Free Report) )
Bottom Line
What happens when the “worst-case scenario” doesn’t happen? Wall Street just delivered a $7 trillion answer. While most investors were hedging for a long-term conflict, the market staged a historic “lockout rally” that left the bears behind.
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Image: Bigstock
The Lockout Rally: Wall Street Just Made History
Key Takeaways
Lockout Rally Makes History
If you have been monitoring equity markets for the past few weeks, you have just witnessed Wall Street history:
“The last 110 days have been unlike any 10-day period in the market since 1950. The S&P 500 is up 9.8% in 10 days, which is in the 99.7th percentile of all 10-day returns. Since 1950, there have been 20 instances in which the stock market rose this much in 10 days. Over the next 12 months, returns averaged 19% with 17 up and 3 down years.” ~ The Market Ear (@themarketear)
What is Causing the Market’s Strength?
The U.S stock market has added a mind-boggling $7 trillion in market cap in the last 16 days alone after a complete V-shaped recovery from the Iran war sell-off. So, what caused the rapid rebound? Investors assumed the worst for the Iran war and got extremely negative from a positioning and sentiment perspective. For instance, as I wrote in my March 31st piece “Is the War Over? If so, Bears are Trapped,” the put/call ratio was more extreme than the 2025 Tariff tantrum, and sentiment indicators showed more bears than bulls. Then, in classic fashion, President Trump surprised markets with his “Shock and bore” approach, threatening to “end a civilization” but instead leveraging his extreme rhetoric to get Iran to the negotiating table.
Meanwhile, despite the rip-roaring rally and the fact that U.S. stocks are at all-time highs, investors remain skeptical. For example, bears still outweigh bulls according to the AAII Sentiment Survey.
Image Source: AAII
Additionally, retail % of gross volumes is now at levels last seen pre-COVID.
Image Source: Morgan Stanley
Strength Begets Strength
Historically, consistent green sessions for the Nasdaq have led to massive forward returns. When the NASDAQ is up for 12 consecutive days, similar streaks have led to finish higher 1 year later 100% of the time, with an average gain of +20%. Additionally, when you break it down further to April, the returns get even more bullish. Since 1928, when the S&P 500 is up 5% or more in the first 15 days of April, the market is up 31.9% on average for the rest of the year.
Seasonality: The Presidential Cycle
The recent bout of volatility is the norm for the 4-year Presidential seasonality cycle. Although volatility could return to markets before the midterm elections, the strongest part of the cycle looms.
Image Source: Nautilus
AI Stocks Emerge from Bases
Price action among leading stocks is the best market “tell” for investors. Over the past few weeks, several AI-related stocks have emerged from multi-month base structures including Nebius ((NBIS - Free Report) ), IREN ((IREN - Free Report) ), Advanced Micro Devices ((AMD - Free Report) ), Bloom Energy ((BE - Free Report) ), and SK Telecom ((SKM - Free Report) )
Bottom Line
What happens when the “worst-case scenario” doesn’t happen? Wall Street just delivered a $7 trillion answer. While most investors were hedging for a long-term conflict, the market staged a historic “lockout rally” that left the bears behind.