Stock indices have started to move sideways. However, we do not see signs of correction and many individual themes still look very strong.
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.
A week ago, the Kvarn Pulse newsletter was written in a rather optimistic mood. The S&P 500 index had just climbed above 7,400 points, and the rally seemed likely to just continue. However, at that time, we drew attention to the decreasing number of companies in an uptrend, which often precedes the end of a rally.
Over the past week, the S&P 500 index has been moving sideways without a clear trend. On Thursday, May 14, 2026, the index still made a strong daily gain, temporarily climbing above 7,500 points. From Friday to Tuesday, the index clearly began to decline, which led us to prepare for a potential correction. On Wednesday, however, we saw a daily bounce of over one percent back up.
Right now, the situation is open to multiple interpretations, and we need a few more days before drawing strong conclusions.
In the best-case scenario, the sideways movement of the past week might simply be consolidation before the upward trend resumes. We saw a similar leveling-off phase exactly a month ago in the latter half of April.
The situation right now is quite difficult to interpret, and we have to look for clues from rather weak signals. Our baseline, however, is that since our last clear observation was a break in the stock market's upward momentum, we are treating the market with a "guilty until proven innocent" approach and want to see clear signs of momentum returning.
At the equity index level, we have not quite seen this evidence yet.
To be convinced that the rally is continuing, we would like to see the Nasdaq 100 index start outperforming the S&P 500 index again. We have not seen this just yet.
Furthermore, semiconductors, which have acted as the engine of the rally, have not yet started to outperform the Nasdaq 100 index either.
On the other hand, it must also be emphasized that even though the upward momentum is currently broken, we also do not see the kind of nervousness in the market that would make us expect a larger correction. Kvarn X Early Warning Indicator has remained in the green.
Perhaps the most encouraging signs right now can be found in the crypto market. The price of the largest cryptocurrency, Bitcoin, seems to have found support levels around $76,000 in recent days and has turned upwards.
If $76,000 remains the local bottom, it would draw a narrow "higher low" compared to the bottom of around $75,000 seen at the end of April. Finding such rising support levels would strengthen confidence in the durability of the uptrend seen in recent weeks.
Before making strong interpretations, however, we still have to wait to see Bitcoin's price cross the $79,000 level. Until then, we must keep the door open to the possibility that this is just a bounce in an ongoing downtrend.
Alongside Bitcoin's price development, we find the internal movement within the crypto market between Bitcoin and altcoins to be quite encouraging. From the chart below, it can be seen that the ratio of the total market capitalization of altcoins to Bitcoin began to fall below its 200-hour moving average at the end of last week.
Over the past 24 hours, however, we have seen this ratio turn back upwards.
As long as we see altcoins strengthening relative to Bitcoin, it is hard for us to interpret the market sentiment as highly "risk-off." If investor risk appetite were waning, we believe the first signals would be not only a decline in the dollar-denominated prices of cryptocurrencies but also a weakening of altcoins relative to Bitcoin. Right now, the direction of these metrics seems to be upwards again, which gives reason for optimism.
In the last couple of Kvarn Pulse newsletters, we raised the hypothesis that following the fierce stock market rally, the best returns might soon be found in gold again.
This week, we must at least temporarily discard this hypothesis.
Up until the writing of last week's Kvarn Pulse newsletter, it seemed that the ratio between the price of gold and the S&P 500 index might indeed be turning. Over the past week, however, the direction has turned downwards again.
In early May, the price of gold seemed to be drawing a promising "higher low." However, in mid-May, this was followed by a stalling of the rally into a "lower high," and over the past week, we have seen a new "lower low."
Currently, gold's price development looks like sideways movement at best, and the beginning of a downtrend at worst.
Presently, the price of gold is approaching its 200-day moving average at around $4,400. This is an interesting milestone, as during the sudden drop in March, the price decline stopped exactly at the 200-day moving average.
We will be following with interest to see how the price of gold develops near this milestone. A potential reversal of momentum in this area would be a highly interesting signal and could represent a very attractive buying opportunity. Right now, however, we do not see positive momentum, so we remain in a wait-and-see mode regarding gold for the time being.
Regarding other metals, the situation looks slightly more interesting for now. In the short term, the prices of silver and copper have mostly moved in the same direction as gold. Unlike gold, however, the price of silver is drawing a "higher low," and the price of copper, in particular, remains in an unequivocal uptrend.
Based on this, we find it justified to continue tracking our hypothesis of a potential "metal season," even though the largest precious metal, gold, does not seem to be participating right now.
The ratio of silver to gold also appears to remain in an uptrend.
As long as we see silver outperforming gold, and altcoins outperforming Bitcoin, it is difficult for us to turn our baseline expectations very pessimistic. If market risk appetite were waning, we would expect these ratios to start weakening clearly.
Thematic Ideas
Among individual investment themes, we highlight the space sector as particularly strong. The price of the VanEck Space Innovators ETF has not even dipped significantly over the past week and has just today risen to new record highs again.
Another very strong theme appears to be cybersecurity. The price of the iShares Digital Security ETF (LOCK) has pushed upwards almost without interruption since early April and has hit new record highs over the past week.
Semiconductors have acted as the engine of the fierce stock market rally. The prices of the largest semiconductor funds have not yet reached new record highs this week, but we would not be surprised if semiconductors soon reclaim their spot as the strongest segment of the stock market.
On the cryptocurrency side, we decentralized crypto exchange Hyperliquid’s token HYPE. HYPE's price has clearly outperformed the broader crypto market, and it has just risen to new all-time highs.
HYPE's price is being boosted by both the growing use of Hyperliquid and new ETF launch.
We started this newsletter by noting that at the index level, we have not quite yet seen the stock market conclude its temporary weak phase. However, when looking at the individual segment level, many "risk-on" segments are performing quite strongly, making it rather difficult to hold on to pessimistic views.
Earlier in the week, we were more prepared for the possibility of a correction, but during this week, the evidence pointing to one has decreased rather than increased. If Thursday and Friday proceed on the markets on any positive note at all, our baseline expectations for the markets will begin to turn unequivocally positive again.
So, are we just going through a softer patch or forming a market peak? The situation is dynamic, and our view needs to be updated every week. The investment year 2026 has offered dramatic moves one after another, and our baseline expectation is that things will not be boring going forward either. Wherever the market goes, we will continue to 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.
The stock market rally has continued in a way that forces us to acknowledge the market’s strength: what still looked like a likely pause just a week ago ultimately turned out to be only a brief stop along the way. With equities, crypto, and even metals all starting to flash green at the same time, the key question is: are we still in the early stages of the upswing, or already in its hottest phase?
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.
Start investing today
Create account