Bear Trap Triggers Historic Bull Stampede
Will The "War Is Over, Everything Is Great Again" Buying Continue?
The Bottom Line
The S&P 500, NASDAQ 100 & Composite, and Russell 2000 closed at new all-time highs last week following a three-week bull stampede into stocks. The focus now shifts to whether this breakout continues, and how far it can run.
This was not a typical rally. It was a one-sided surge driven by positioning.
What Happened
The S&P 500 surged to a new all-time high last week after being down -9.8% just 11 trading days earlier. This is one of the fastest recoveries of that magnitude in history and one of the rarest V-shaped reversals in modern market history.
The rally was driven by a sharp repricing of geopolitical risk as signs of rapid de-escalation in the Iran war emerged. Oil prices fell sharply, easing inflation concerns and removing a range of worst-case outcomes.
At the same time, earnings from financials and select technology companies confirmed that the economy remains strong and that the AI-driven growth cycle is still intact.
Positioning drove the move. These reversals do not happen unless a large portion of the market is caught offside. Short, sidelined, and hedged participants were forced to reposition aggressively.
The result was a lockout rally with no dips and no resistance at prior highs.
It is always easier to explain what has already happened than to predict what comes next. That said, we can map the highest probability paths forward.
This move was driven by positioning, not conviction.
The Price Action
Every single session last week closed higher than it opened. There was no attempt to fill the two large gap-ups from Tuesday and Friday.
This was pure, one-sided momentum
So far this year, two trap reversals have defined the tape.
First, the bull trap constructed in January and February and then put into motion in early March, easily capturing its target at S&P 6548 and more.
Then, the bear trap formed by the bounce that began on March 30th, which was put into motion in early April. That resolved higher into early April, quickly capturing targets at S&P 6902 and 6986, and then pushing to new all-time highs.
And by more, I mean new all-time highs!
Correctly identifying and positioning around these reversals has been the difference-maker this year.
Now the focus shifts to whether this breakout sees sustained follow-through.
Most will read what happened.
Few will position for what comes next.
This is where the real decisions begin. If you want the levels, probabilities, and plan, it’s below.
