Explaining the Resilient S&P 500

Why is the S&P 500 so resilient? Brent oil prices have breached the $100 level, but the index has only fallen about -7% on a peak-to-trough basis. The apparent divergence has led to a number of Street economists and strategists to call for a deeper pullback based on rising recession risk.

From a top-down macro perspective, here are some key differences between the current surge in oil prices and past stock market behaviour based on commonly cited recent oil spike episodes. Most recently, the 12-Day War saw a brief spike in oil price, but the 52-week rate of change was negative, and the S&P 500 shrugged it off. When Russia invaded Ukraine in February 2022, the 52-week rate of change in oil prices was already elevated. In fact, the real surge in oil occurred about a year prior to the invasion. The S&P 500 was already tracing out a top prior to the onset of the war by breaching its 40-week MA before the invasion. By contrast, the S&P 500 only began a test of its 40 dma last week, three weeks after the onset of hostilities.

 
While I have some sympathy for the calls of equity market weakness and rising recession risk, here are some other reasons why the S&P 500 has been so resilient.

The full post can be found here.

Que Sera Sera

Mid-week market update: The words of the day seem to be patience and uncertainty. As the old Doris Day song goes, "Que Sera Sera". No one knows what will happen.

 

I've been monitoring the progress of major averages. Both the S&P 500 and the NASDAQ 100 staged brief breakdowns of support, though the NASDAQ 100 recovered. Most averages remain in their wedge patterns. One hopeful signs is the ability of non-U.S. markets to rally through their falling trend line, with the caveat that the sign of strength may be a fakeout much like the S&P 500 and the NASDAQ 100 late last week.

 

 

Much depends on the length of the war.

The full post can be found here.

TARP, 2026 Style

I have a constructive outside-the-box modest proposal, in light of all the recent hand wringing about how to open the Strait of Hormuz, the recent Economist cover, and the latest 60 Minutes story about the difficulties that the U.S. faces in opening the Strait.

 

Is it time for a TARP-style government financial engineering, 2026 style?

 

The full post can be found here.

Important Questions for Both Bulls and Bears

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). As this site is shutting down on March 31, 2026, my inner trader is retiring so that there will be no tradings outstanding at the end of the quarter. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 to 16-Jan-2026 is shown below, and the chart will no longer be updated.

 

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

 

The Fog of War
As the stock market struggles with the daily fog of war headlines, it has arrived at a key crossroad. The accompanying chart shows the evolution of different major U.S. equity averages. We have some questions for both bulls and bears.

The obvious questions are whether the indices can hold support (solid lines) or rally above the falling trend lines (dotted lines). The first shot across the bow of the bulls are the S&P 500 and NASDAQ 100 violations of short-term support, depicted by arrows, but the break has not been fully confirmed by the other averages and last Monday’s panic outside day reversals are mostly holding (red rectangles). More importantly, how market internals evolve in the coming days and weeks will determine whether the bulls or bears have control of the tape.

A Recessionary Bear Ahead?

In the wake of Gulf War III, the odds of a U.S. recession in 2026 have spiked in the betting markets. Even though the implied recession probability has retreated, they are nevertheless elevated.

Economic recessions are bull market killers. What are the chances of an oil shock-induced recession? Here are the bull and bear cases.

The full post can be found here.

What Happened to the TACO?

Mid-week market update: I wrote on the weekend that the Trump Administration was on the verge of a TACO (Trump Always Chickens Out) pivot. The market had the hint of a TACO on March 9, when he told CBS: “I think the war is very complete, pretty much”, but changed his tune hours later: “we’ve already won in many ways, but we haven’t won enough.” 

 

The TACO is being made. Here is why. Today is the second consecutive day that nationwide average gasoline prices are above $3.50 a gallon.

 

 

During past trade disputes, the TACO was accomplished with a simple Trump pivot because the opposing party was open to the pivot. This time, other belligerents in the conflict have other ideas, namely Iran and Israel.

 

The full post can be found here.

How Do You Say TACO in Farsi?

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). As this site is shutting down on March 31, 2026, my inner trader is retiring so that there will be no tradings outstanding at the end of the quarter. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 to 16-Jan-2026 is shown below, and the chart will no longer be updated.

 

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

 

The TALO-TACO Cycle
Both the Pentagon and Israel have set expectations for a multi-week military campaign against Iran. I believe political pressures will shorten the war in a way that’s beyond the control of military planners. Rising financial market stress, rising bond yields, and surging equity and bond option risk will force Trump to shift from TALO (Trump Always Lashes Out) to TACO (Trump Always Chickens Out).

Here’s why.

The full post can be found here.

War and Peace: History Rhymes, But Which History?

It is said that history doesn’t repeat itself, but rhymes, but investors need to be careful about what history they study.
 

As I prepare for retirement at the end of March, I want to impress upon readers the importance of looking under the hood of past quantitative history studies in order to understand underlying assumptions.
Consider, for example, this timely study of U.S. equity returns after geopolitical and economic shocks. The accompanying table from Ryan Detrick of Carson Investment Research would lead to the conclusion that investors should ignore shocks and buy the dip, as the stock prices tend to shrug off short-term setbacks and rise over time.

A different table from Jeffrey Hirsch at Almanac Trader tells a slightly different story. Hirsch excluded some of the more minor shocks in his event study such as the Asian Financial Crisis and Brexit. Average and median returns are directionally similar inasmuch as stock prices tend to react to the initial shock and then rise afterwards, but the magnitude of the returns is dissimilar to the Detrick study. In addition, post-shock returns improve significantly if investors focus on the post Iran Hostage Crisis period. The worst of the initial short-term price shocks were attributed to World War II and the early days of the Cold War.

In short, how you choose your data sample will affect your return expectations.

The full post can be found here.

A Washout Bottom?

Mid-week market update: The S&P 500 ETF (SPY) traded out a possible reversal yesterday (Tuesday) when it opened down, fell, and recovered to close higher on the day. The move was accompanied by a positive divergence on the 5-day RSI and on above average volume. These are all signs of selling exhaustion and a capitulation bottom.

The full post can be found here.

A Cowardly Bull

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). As this site is shutting down on March 31, 2026, my inner trader is retiring so that there will be no tradings outstanding at the end of the quarter. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 to 16-Jan-2026 is shown below, and the chart will no longer be updated.

 

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

 

Bullish, But…
My Trend Asset Allocation Model is bullish, so I am intermediate-term bullish. My Trend Model applies trend-following techniques to global stocks and commodity prices. The accompanying chart shows that the MSCI All-Country World Index (ACWI), ACWI ex- U.S., and commodity prices (all in USD) are in solid uptrends.

However, a number of cracks are appearing under the surface that are making me into a cowardly bull.

 

The full post can be found here.