The Rally That Started in the Dark

• CNN’s Fear & Greed Index has flipped from extreme fear to greed.

• The RSI on the S&P 500 and Nasdaq have surged from oversold to overbought.

• These shifts point to a meaningful momentum turn in the market.

Three weeks ago, the market was drowning in fear. Now it’s sprinting like it remembered how to breathe…

Every investment cycle has a moment when the tone shifts. That’s when the market stops trading like it’s bracing for impact and starts behaving like it’s ready to run. Over the last several weeks, we’ve watched that shift unfold in real time. What began as a market weighed down by fear, forced selling, and quant‑driven pressure has now swung sharply in the opposite direction.

Back in late March and early April, the setup looked very different. Due to the conflict between the U.S., Israel, and Iran, the media headlines were filled with reports of World War III. Quant‑driven CTAs had pushed their equity exposure to maximum short. They were amplifying every downtick and fueling a feedback loop of mechanical selling.

Sentiment was equally bleak: the CNN Fear & Greed Index had collapsed to 10, a level typically reserved for true capitulation. And technically, the market was stretched to the downside, with the RSI on the S&P 500 and Nasdaq Composite having dropped below 30. Both gauges were signaling oversold conditions not seen since the prior spring. It was the kind of environment where even good news struggled to gain traction.

Fast‑forward to today, and the picture has flipped. Now the U.S., Israel, and Iran are in discussions about a possible end to the fighting. The RSI on both the S&P 500 and the Nasdaq has surged above 70, pushing into near‑term overbought territory. The Fear & Greed Index has swung all the way back into Greed, reflecting a rapid shift from panic to performance‑chasing. CTAs, once heavily short, have been forced to cover and, in some cases, flip long as price momentum turned decisively upward. What we’re seeing isn’t just a bounce, it’s a full reversal of fortune. The result is a momentum swing that points to a steady rally in both the Nasdaq Composite and the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

The reversal in sentiment and technicals isn’t happening in isolation. It’s arriving on the heels of the consecutive positive closes we recently highlighted for both the S&P 500 and the Nasdaq. Historically, these streaks have been reliable markers of above‑average full‑year returns. They tend to appear when selling pressure has exhausted itself, liquidity improves, and buyers begin stepping in consistently. In other words, they’re early signals that the market is transitioning from a choppy, range‑bound phase into a more directional one.

For instance, take a look at the rapid rebound we’ve experienced in the relative strength index for the S&P 500…

And the Nasdaq Composite…

Both have surged at one of the fastest paces on record. Even the rebound from COVID and Liberation Day were nothing like this. In other words, each is signaling a flip into a new momentum regime with remarkable speed. That kind of shift typically marks the start of a sustained advance rather than the end of a short‑term bounce.

When you combine those streaks with the dramatic sentiment reversal we’re seeing now, the message becomes clearer: the market is undergoing a momentum regime shift. These shifts don’t happen often, but when they do, they tend to persist longer than investors expect.

Take a look at the CNN Fear and Greed Index. It has jumped from a reading of “extreme fear” a month ago to one of “greed” today…

Momentum is one of the most durable factors in markets, and once it reasserts itself, it often carries through for months. Quite often, investors that sold on the way down will sit out the early phases of the recovery, waiting for the next pullback. And when it doesn’t happen, they’ll typically jump back in, after stocks have moved even higher.

Markets rarely move from one extreme to the other this quickly unless something meaningful is changing beneath the surface. And in this case, the change appears to be a broad reengagement of risk appetite. Considering the Middle East is evolving in the direction of resolution, all of the pessimism may have gotten ahead of itself.

None of this means the next few weeks will be smooth. Overbought conditions can and do lead to short‑term pullbacks. But those are tactical considerations, not strategic ones. The bigger picture is that the market has absorbed a wave of pessimism, forced selling, and geopolitical anxiety. Yet, it has come out on the other side with stronger trend structure and a more constructive tone.

This is where the long‑term perspective matters. these kinds of momentum shifts tend to be positive long‑term indicators for investors. They mark the moments when the investing mindset starts to transition from fear to opportunity, from defense to offense, from hesitation to conviction. And right now, the data is telling us that arc is bending in a more constructive direction.

Five Stories Moving the Market:

U.S. President Donald Trump said he’s not likely to extend the two-week ceasefire with Iran, increasing the urgency for negotiators to conclude a deal to end the war – Bloomberg. (Why you should care – Trump warned the U.S. would resume strikes on Iran if progress isn’t made)

Iran has told regional mediators that it would send a negotiating team to Islamabad this week for the second round of talks with the U.S.; Tehran said it was hesitant to participate in further peace talks with the U.S. – WSJ. (Why you should care – Iranian officials continue to send mixed messages, a sign of political upheaval within its government)

Apple named insider John Ternus as its next ​CEO, tasking the long-time hardware chief to steer the company after Tim Cook as ‌the iPhone maker gears up for an industry change spurred by artificial intelligence – Reuters. (Why you should care – Apple is pivoting away from a supply-chain guru to a leader focused on design and innovation)

South Korea’s export growth remained robust in early April, signaling resilient external demand for AI infrastructure goods; Exports adjusted for working-day differences rose 49.4% from a year earlier in the first 20 days of April, according to customs office data – Bloomberg. (Why you should care – semiconductor exports are up 182.5%, likely driven by demand for high bandwidth memory chips)

Amazon said it will invest up to $25 ​billion in Anthropic, as the AI startup commits to ‌spending more than $100 billion over the next 10 years on Amazon's cloud technologies; ⁠the new investment in Anthropic follows Amazon's announcement earlier this year it would invest up to $50 billion in OpenAI – Reuters. (Why you should care – the deal highlights the growing demand for AI compute power via semiconductors and data center capacity)

Economic Calendar:

Earnings – COF, DHI, DHR, GE, ISRG, MMM, NOC, RTX, UNH, WRB

U.K. – Unemployment Rate for February (2 a.m.)

ECB’s Nagel (Germany) Speaks (2:30 a.m.)

ECB’s De Guindos (Vice President) Speaks (3 a.m.)

Germany - ZEW Economic Sentiment for April (5 a.m.)

U.S. – ADP Employment Change Weekly (8:15 a.m.)

U.S. – Retail Sales for March (8:30 a.m.)

U.S. – Pending Home Sales for March (10 a.m.)

Treasury Auctions $70 Billion in 6-Week Bills (11:30 a.m.)

Fed’s Waller (Board Member, Voter) Speaks (2:30 p.m.)

U.S. - American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)