Markets jolted higher on ceasefire hopes—but is this the start of a real recovery or just a temporary relief rally? The coming days may define the trend, while crypto quietly builds significant upside potential if risk appetite truly returns.
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On Wednesday, April 8, 2026, the markets saw a fierce upward movement as investors digested fresh news about a potential ceasefire in the Middle East conflict. The S&P 500 index jumped by a full 2.5%, breaking its downtrend that began in the latter half of February.
The question on almost every investor's mind now is: is the crisis over?
Was the downtrend, which already started to resemble a bear market, ultimately just a deep correction, and is the direction upwards again?
Our view can be summarized briefly:
We would love to state that we are in a new uptrend, but we cannot quite yet trust that it has begun.
Yesterday's market rally was very impressive, but many of the criteria for final conviction were still narrowly missed, at least as of yesterday.
In mid-February, we began warning our readers about the possibility of a market top. At that time, we set the 6,800-point mark on the S&P 500 index as a watershed level, the breach of which would significantly confirm the interpretation of a beginning downtrend.
Now that this level has been broken below, we would correspondingly like to see it surpassed before we can consider the market trend to be bullish again.
Interestingly enough, the S&P 500 closed just below this level on Wednesday. Thus, this criterion remains unfulfilled for now.
As a second criterion for an uptrend, we look for the Relative Strength Index (RSI) to rise above 60.
We find the heuristic quite useful: in an uptrend, the RSI typically rises above 60 and does not fall below 40, whereas in a downtrend, the RSI falls below 40 and does not rise above 60. In a sideways movement, the RSI typically remains between 40 and 60.
Looking at these boundaries, the RSI recently failed to cross above 60 at the end of January and dropped below 40 at the beginning of February—both characteristics of a downtrend. We would therefore like to see the RSI climb above 60 before we can shift our interpretation toward an uptrend.
Interestingly, just like the 6,800-point mark on the S&P 500, this milestone was also narrowly missed on Wednesday.
In addition to the S&P 500's 6,800-point mark and the RSI's 60-point mark, our confidence in a new uptrend would increase if we saw the technology sector begin to show more relative strength than it currently does. Outperformance by the tech sector often indicates a return of investors' risk appetite.
We can approximate the relative performance of the technology sector by comparing the tech-heavy Nasdaq 100 index (NDX) against the broader S&P 500 index (SPX).
From the chart below, we can see that the NDX/SPX ratio made its first "lower high" in early December. This served as an early warning that investors' risk appetite might be waning.
From December onwards, the NDX/SPX ratio made lower highs and lower lows right up until late March, when we saw a promising first "higher low."
This was an encouraging sign. However, we would still like to see the NDX/SPX ratio make a "higher high” by surpassing the levels seen in mid-March.
Interestingly, this criterion also remains unfulfilled for the time being.
All three criteria are therefore very close to signaling a return to "risk-on" conditions. However, we have not yet seen any of these criteria unambiguously fulfilled, which is why we must still treat Wednesday's market movement with considerable caution.
We believe that tracking these three criteria will help our readers navigate what is currently a very ambiguous situation. We will return to these criteria in next week's Pulse to see if this budding optimism has gained any further supporting evidence.
What, then, is holding back the return to an uptrend?
In our previous Pulse newsletters, we have analyzed the stock market by dividing the S&P 500 index into the so-called Magnificent 7 companies and "the rest."
This perspective feels particularly informative right now. Looking at the Mag 7 group and the rest of the S&P 500 index separately, it can feel as though you are looking at two entirely different markets.
When looking at the price of the Defiance Large Cap ex-Mag 7 ETF (XMAG), which invests in the S&P 500 outside the Mag 7 companies, everything is already starting to look promising.
The price has already climbed above its 50-day moving average, the 50-day average is above the 200-day moving average, and yesterday, the 50-day average even turned upwards. The Relative Strength Index also crossed the 60 milestone yesterday, which, referring to our earlier point, we consider a sign of an uptrend.
Outside the Mag 7 group, everything therefore looks bright and ready for a new rally.
If we turn our gaze to the price of the Roundhill Magnificent Seven ETF (MAGS), we are faced with an alternate reality.
The price is still well below its 50-day moving average, which is not only on a downtrend but has already dropped below its 200-day moving average, forming a classic "death cross." The Relative Strength Index has only just risen above 50, and is still far from the 60 mark that would indicate an uptrend.
Viewed through the lens of the Mag 7 group, Wednesday's upward movement still looks like nothing more than noise within a downtrend for the time being.
We are currently seeing a significant discrepancy between the largest technology companies and the rest of the stock market. These tech companies carry a substantial weighting in the equity indices, making it difficult to see how the indices could make significant upward moves without the participation of the Mag 7. Therefore, we believe that the Mag 7 companies are worth keeping an eye on when evaluating the sustainability of an uptrend.
Crypto Market Moving Sideways
While the stock markets have reacted quite strongly both to the outbreak of the Middle East conflict and the possibility of a ceasefire, the crypto market has remained relatively static. The price of Bitcoin, the largest cryptocurrency, has been moving sideways and is quite difficult to interpret.
We primarily view Bitcoin's price movements between $65,000 and $75,000 as noise, and we avoid making strong interpretations until we see this range break in one direction or the other.
However, we do want to bring one perspective regarding the crypto market to our readers' attention.
If investment market sentiment were to shift into a "risk-on" mood following a potential de-escalation of the Middle East conflict, the crypto market looks highly interesting in light of relative valuations.
If we plot Bitcoin's price against the S&P 500 stock index, we can see that this ratio has already fallen to around its summer 2024 lows. The ratio has also dropped below its 200-week moving average.
Our interpretation is that, looking at history, the crypto market currently appears quite attractively priced based on relative valuations. If market risk appetite truly begins to return, we see considerable upside potential in the crypto market.
It is worth emphasizing, however, that for this potential to materialize, investors must genuinely shift into a "risk-on" sentiment, and we are not yet entirely convinced that this has happened.
Nevertheless, we strongly advise keeping a close eye on the crypto market. It is well known that cryptocurrency prices often move upwards much more sharply than stock indices, which is why, unlike in the stock market, being even a couple of weeks late can have a significant impact on capturing returns. Therefore, we recommend closely monitoring Bitcoin's price and the potential crossing of the $75,000 level.
The stock market has just experienced a fierce bounce. Next week may reveal whether the concerns raised by the Middle East conflict have been left behind and if prices are heading back up.
Wherever the market goes, we will continue to track it and keep you updated, so stay tuned!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.
The escalation of the Middle East conflict has increased uncertainty across financial markets and pushed equity indices closer to technically critical levels. At the same time, the current environment continues to offer compelling opportunities in selected investment themes, while the crypto market has remained surprisingly resilient despite the broader risk-off sentiment.
Key points 1. The U.S. stock market is increasingly showing signs of a market top. 2. Geopolitical instability favors physical resources and the defense industry. 3. The crypto market remains surprisingly stable.
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