29.05.202615:49 Forex Analysis & Reviews: S&P500 (SPX): is the rally running out of steam?

The US stock market is finishing May on a high note. The S&P500 has settled above 7,560.00, extending its winning streak to nine consecutive weeks. Investors are showing remarkable resilience despite renewed geopolitical uncertainty in the Strait of Hormuz and the Fed's obvious hawkish pivot. Technical indicators, however, have been in the oversold zone for more than a week and have begun to flash warning signs of a possible correction.

Fundamental backdrop: ignoring risks

The market continues to discount geopolitical uncertainty, betting on diplomacy. According to Axios, the US and Iran have reached a preliminary agreement on a 60-day ceasefire. That sparked a fresh wave of buying as investors hope the Strait of Hormuz will be reopened and energy markets will stabilize.

The euphoria is tempered by the fact that the deal still requires final approval from US President Donald Trump, who has asked for "a few days" to consider it. Negotiations on Iran's nuclear program and shipping controls remain stalled, and military escalation in the region continues.

While geopolitics creates "noise," the key factor limiting more aggressive gains remains monetary policy. Inflation data published this week showed core PCE accelerating to 3.3%.

That has reinforced expectations that the Fed not only will refrain from cutting rates but could move to raise them. According to CME FedWatch, the probability of a rate hike before the end of 2026 is roughly 50%.

Economists warn that the "hot" US jobs data (Nonfarm Payrolls) due next week could be the catalyst for an even more hawkish Fed shift.

From a technical standpoint, the uptrend remains intact. The nearest target is 7,600.00.

Market analysts note, however, that the number of stocks participation in the rally is shrinking. Only about 60% of S&P500 companies trade above their 200-day moving averages (historical norm — 73%). Only 33% of stocks are outperforming the index this year, approaching extremely low levels.

As noted, technical indicators are in overbought territory after eight weeks of consecutive gains, signaling an overheated market.

Levels to watch

• Resistance: 7,600.00–7,615.00. A break above would open the way to 7,700.00.
• Support: 7,560.00–7,490.00 (200 EMA on the 1-hour chart).
• A loss of 7,500.00 would increase downward pressure toward 7,285.00–7,200.00.

Earnings season

The quarterly earnings season is virtually over, and results have beaten expectations. S&P500 Q1 EPS came in at 80 versus an expected 70. That, in theory, gives the index room to rise another 800–1,000 points, economists say. The Broadcom (AVGO) report on Wednesday will be the main test for the semiconductor sector, which has been a leader in the rally (+80% from March lows).

Key events next week

The S&P500 continues to climb, showing surprising resilience amid geopolitical uncertainty. Corporate earnings, which have significantly exceeded expectations, remain the primary driver. However, technical indicators point to an overheated market. The market is pricing in a peace agreement that has not yet been signed.

The key resistance zone is 7,600.00; a break above would clear the way to 7,700.00. Investors should remain cautious. The coming days will be decisive for the market's direction.