Analysts predict a potential rebound for the S&P 500 following recent declines attributed to the Iran war and AI anxiety. With the index oversold and potential intervention by the Trump administration, experts suggest a relief rally is on the horizon.
Good news for investors: A relief rally may finally be on the way.That's the word on Wall Street as markets survey the damage stemming from the Iran war, which has dragged stocks lower for most of the past month as investors fretted over the impact of higher oil prices on the US economy.
The S&P 500 — which looked on track for another year of strong returns — is down 6% in 2026. That sharp year-to-date decline even includes a more-than-1% rally on Tuesday, which came after President Trump reportedly told his aides he was willing to end the war on Iran, even if the Strait of Hormuz were to remain closed.The decline so far this year has largely stemmed from AI anxiety rocking the tech sector, as well as a broader risk-off movement as the US-Israeli conflict with Iran escalated.But more forecasters think the recent events have left the S&P 500 oversold — and are eyeing a sharper recovery for stocks around the corner.Adam Kobeissi, a longtime analyst and the founder of The Kobeissi Letter, wrote in a note on Monday that the S&P 500 looked poised for a rebound. He pointed out that the index is now trading at its lowest level in 232 days and that its daily Relative Strength Index, a measure of how overbought or oversold an asset is, is around 29. When the gauge drops below 30, it's often interpreted as a sign that an asset is oversold."We believe that a relief rally is needed at the bare minimum on the basis of severely oversold technicals and imminent intervention by the Trump Administration," Kobeissi wrote, adding that he was setting a target of 6,500 for the S&P 500, implying 2% jump from the index's current levels.Jay Woods, the chief market strategist at Freedom Capital Markets, also said he was eyeing the conditions for a relief rally. He pointed to how the S&P 500 had fallen below its 200-day moving average, a key technical level that could signal the index is nearing a bottom.In 20 out of the last 28 times the S&P 500 has broken below the 200-day moving average, the index climbed back above that level within 10 trading days, Woods wrote in a note to clients."In all cases except the bear market of 2022 things were short lived and provided great entry points for traders over both the long and short-term," Woods wrote."But will this be the time to put money to work where we should find a more stable floor and get that snap-back rally? That is very likely. Remember the biggest rallies in the market also happen under the 200-day moving average," he later added.The S&P 500 looks like it could be just one or two weeks away from hitting a bottom, according to Mark Newton, a technical strategist at Fundstrat Research. He said that he saw the S&P 500 finding support at around 6,200, pointing to various technical signals that suggested limited downside from current levels."Momentum is nearing oversold levels on daily charts," Newton wrote on Monday. "Sentiment is turning more negative, and the Administration seems to be nearing a pain threshold that might offer some relief to Equities in April."Rosenberg Research, the research firm helmed by the bearish economist David Rosenberg, floated a possible stock rally through the spring and early summer. Despite the recent sell-off, ten sectors in the S&P 500 appear to have a "bullish bias" when examining their recent momentum, Walter Murphy, the firm's technical analysis consultant, wrote in a note on Friday."It is reasonable to anticipate that this solid majority bullish condition will continue into July. The bottom line of all of this is that, after almost six months of market malaise, the conditions for a spring-summer rally are developing," he said.JPMorgan's market intelligence team said it mostly expected stocks to continue "chop sideways," but suggested there was room for a sharp move in the near future, depending on how the situation with Iran pans out."Stocks have cheapened materially; and from a technical perspective, we are close to support," strategists wrote on Tuesday. "De-escalation in the form of an agreement for US and Iranian official to meet will spark a rally and a ceasefire will trigger both a squeeze and re-risking," they later added.
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