S&P 500 has rallied over 7400 points. The stock market seems stretched, but we have not yet seen any signs of an actual correction.
This content has been produced by Kvarn Investment Services Oy, a licensed investment firm supervised by the Finnish Financial Supervisory Authority. The content is intended for informational purposes only and should not be interpreted as investment advice or recommendation. All investing involves risks, and past performance is not a guarantee of future returns.
1. S&P 500 index still on the rise
2. Bitcoin's price has consolidated below its 200-day moving average
3. The next big opportunity in metals?
When writing last week's Kvarn Pulse newsletter, the markets were in a rather euphoric mood. The S&P 500 index had ended its short consolidation and risen to new record highs once again, climbing above 7,300 points.
Over the past week, the stock market has continued its upward trend.
On Tuesday, May 12, 2026, we saw the indices dip slightly following the release of the latest inflation figures. However, this one-day decline occurred after an exceptionally strong week of gains and gives us no reason to change our interpretation that the uptrend will continue. As long as the S&P 500 index stays above 7,300 points, we will treat any potential down days as mere noise.
What deserves slightly more attention than the development of the S&P 500 index is the narrowing of the rally. From the chart below, we can see that while the S&P 500 index has continued upwards over the past week, the number of stocks trading above their 50-day moving average has turned downwards.
Meanwhile, from the lower panel of the chart below, we can see that the number of companies listed on the New York Stock Exchange making new 52-week lows has started to rise.
If this were a broad and sustainable rally with plenty of upside left, we would expect to see very few new 52-week lows, and preferably in decreasing rather than increasing numbers.
One can see some similarities in the situation to, for example, the fall of 2025. Back then, too, the indices climbed upwards driven by technology companies, while the number of new lows increased. However, the rise in the number of new lows might have provided a hint that the index-level rally was coming to an end.
On the other hand, in recent years, these kind of breadth indicators have worked less effectively, as equity indices have predominantly moved higher driven by a narrow vanguard of technology companies. The narrowing of the rally is nevertheless noteworthy and makes us pay a bit more attention to other signs that could confirm the interpretation that the rally is coming to at least a temporary end.
For now, our interpretation of the stock market remains largely the same as last week. The rally continues, even though we could see several reasons why it shouldn't. The speed and intensity of the rally, the seemingly obvious overextension at the index level, and the narrowing of the upward move all suggest that immediate upside potential should be very limited.
At the same time, we keep in mind that the situation has been similar for several weeks already. The "mean reversion" we have been expecting has not occurred. For this reason, we will not predict that it will necessarily happen over the next week either.
Kvarn X Early Warning Indicator remains in the green. This indicator reacts quite sensitively to increased market nervousness, and until we see it turn to at least yellow, we do not expect significant downward movements.
A week ago, the price of the largest cryptocurrency, Bitcoin, was just below its 200-day moving average. We speculated then that after a strong rally, this important technical watershed might offer some resistance.
A week later, this seems to have been the case, and Bitcoin's price has consolidated just below its 200-day moving average.
As long as Bitcoin's price stays above $79,000 AND the stock market shows no signs of a growing risk of correction, our primary expectation for the crypto market remains unequivocally positive.
As a final observation, we bring up something slightly a bit odd but, in our view, interesting. If we plot the S&P 500 index (SPX) against the gold ETF GLD, and the price of the BTC ETF IBIT against the S&P 500 index, we can see that neither of these ratios has made new highs since May 5, 2026.
This is not yet a strong signal, but we believe it is worth monitoring. For our confidence in the market's "risk-on" sentiment to continue, we would like to see equity indices outperforming gold and Bitcoin's price outperforming equity indices. Over the past week, we have not seen this, which in our opinion gives reason to keep an eye on these ratios over the coming week as well.
Last week, in our Kvarn Pulse newsletter, we presented a hypothesis that gold, a traditional store of value, might soon begin to offer better returns than equity indices.
Behind our hypothesis was the awareness that despite the strong bull market fueled by the AI boom, the S&P 500 index has weakened against gold over the past two years. The ratio of the S&P 500 index to the price of an ounce of gold has long remained below its 200-day moving average and is currently approaching it.
If the trend of the stock market's long-term underperformance relative to gold were to continue, this would be the area where the ratio could start to turn downwards again.
When the approach of such an important watershed for this ratio occurs while the stock market is simultaneously looking extremely overextended, it is quite easy to see a scenario where the price of gold could begin to outperform equity indices.
A week later, we can review this hypothesis and notice something interesting. While the S&P 500 index has continued upwards in dollar terms, it has not advanced much relative to the price of gold for two weeks now (to get the latest price data, the chart uses S&P 500 mini futures (ES1!) and gold futures (GC1!)).
At present, the hypothesis of gold's future outperformance thus looks quite viable. Of course, we have not yet seen this ratio turn into a downtrend, but we would not be surprised if that were next in line. We will continue to monitor the situation and return to it in future Kvarn Pulse newsletters.
In the last Kvarn Pulse newsletter, we also proposed that because the markets are, at least for now, clearly in a "risk-on" mood, we might see silver begin to outperform gold.
This hypothesis also currently appears valid. The ratio of silver to gold prices has just risen higher than at any time since the start of the Middle East conflict.
In dollar terms as well, the price development of silver and silver mining companies looks promising. The price of the WisdomTree Physical Silver ETC (PHAG) has just risen above all its key moving averages, simultaneously surpassing the local peak seen in April. The Relative Strength Index has also risen above 60 for the first time since February, which indicates strong momentum typical of an uptrend.
In addition to silver, copper also looks strong. The price of the WisdomTree Copper ETC (COPA) has risen to its highest-ever daily close.
The prices of copper mining companies (Global X Copper Miners UCITS ETF USD, 4COP), however, have not yet taken off in the same way. An optimist might therefore see them as interestingly undervalued. From the chart below, it can be seen that the previous two times the 4COP/COPA ratio dropped to around two, it preceded a rather fierce rally in copper miners. This time, the mining companies might be weighed down by rising energy prices, but we are following this segment with interest as well.
Rare earths also look interesting. The price of the VanEck Rare Earth and Strategic Metals (VVMX) ETF spent early 2026 consolidating between 13 and 17 euros, but now looks ready to continue its journey upwards.
The stock market thus remains on an upward trend. However, such a strong rally leads us to consider where the best return opportunities might be found next. At the moment, we find metals quite interesting, and we will continue to analyze their price development. Wherever the markets go, we will monitor the situation and keep you up to date, so stay tuned!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.
Equity markets have staged a powerful rally to record highs, but beneath the surface, risk appetite appears to be narrowing increasingly toward technology and AI-related themes. The key question now is whether this pause becomes a healthy consolidation — or develops into a broader correction across both equities and crypto.
Equity markets continue to surge higher, led by technology, even as the broader news flow remains dominated by geopolitical tension and uncertainty. While the immediate upside at the index level may be starting to look more limited after such a sharp rally, the cryptocurrency market still appears highly promising and full of potential.
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