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?
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 cautious mood.
The stock market had behind it a very strong rally that lasted throughout April. In recent days, however, this rise had started to level off, and the index's trajectory began to look more like a sideways movement.
This made us quite cautious in our assessment, and we summarized our analysis with the following estimation:
"The most likely scenario seems to be that we will soon see the rally in this sector stall as well, bringing the rise in equity indices to at least a temporary halt.
If this were to happen, attention would shift to whether it is just a consolidation or perhaps a more significant correction.”
In our expectation of a temporary halt, the most accurate part seems to have been the word “temporary”.
Already on Friday, May 1, 2026, the index turned back to an upward trend, and over the past week, the S&P 500 index has climbed over three percent.
This move looks quite fierce, considering that prior to last week, the index had already experienced a very sharp rally. The S&P 500 index has now risen by about 16 percent since the end of March, which would be a rather strong annual gain.
Such a steep rise inevitably makes one prepare for the risk of some kind of correction.
From the graph below, it can be seen that when the S&P 500 index has visually clearly detached from its 50-day moving average, this has in recent years always been followed by at least some sort of plateau or a downward correction.
The absolute engine of the past month's upward move has been the semiconductor sector. The price of the VanEck Semiconductor ETF (VVSM) has surged by a staggering 50-plus percent since the end of March.
Since semiconductors have been the primary driver of the rally, our assumption is that the end of the rally would likely first be seen as a stalling in their wild ascent.
We consider both the absolute performance of semiconductors (SMH) and their relative performance compared to the S&P 500 index (SMH/SPY) as interesting indicators.
If softness were to appear in either one, it would increase expectations of a local top forming soon. Right now, we do not see such signs, and therefore we do not expect a local top to be at hand just yet.
Kvarn X Early Warning Indicator, which aims to identify growing market nervousness before it shows up in price action, also gives no reason for immediate concern about corrections.
As can be seen from the graph above, this indicator is still in the green zone. Our baseline expectation is that significant corrections will not begin until this indicator has turned at least yellow. It can also be seen from the graph above that the indicator also gives "false alarms" that are not followed by significant corrections. Precisely because of this sensitivity, we consider the risk of a correction to be quite small as long as the indicator remains green.
Last week, we noted that we had shifted to an at least temporarily wait-and-see stance regarding the crypto market.
This was because, as the stock market rally slowed down, temporary weakness also began to appear in the price development of the largest cryptocurrency, Bitcoin. We stated at the time that as long as Bitcoin's price stays above $73,500, we are ready to write this off as mere consolidation.
A week later, we can note that, just like with the stock market, this weakness in Bitcoin was also only temporary. The price stayed clearly above the $73,500 level we considered a watershed, and has now climbed over $81,000.
Currently, Bitcoin is just below its 200-day moving average. Such significant technical watersheds often provide some resistance, and we would not be surprised if, after the strong rally of recent days, the price had some difficulty breaking through it immediately.
In several of our previous newsletters, we have highlighted Bitcoin's low relative valuation. We realize that discussing this topic may be becoming repetitive, but we still consider it important to keep the topic on the table and monitor its development.
If Bitcoin were to offer dramatically better returns than the stock market, such a move would likely begin when its relative valuation is temporarily unjustifiably low.
A low valuation is a promising condition that enables dramatic rallies, but naturally does not guarantee them.
The graph below illustrates Bitcoin's price development relative to the S&P 500 index (IBIT/SPX), viewed on an hourly timeframe.
Right now, this graph offers the possibility of two different interpretations:
The optimistic interpretation is that this ratio is about 40% lower than last summer and has been in a clear uptrend since late February.
The pessimistic interpretation is that there has been no clear positive development in this ratio since mid-March, even though the market has shifted into a clear "risk-on" mood.
We believe that one of these interpretations contains a signal that, viewed in hindsight, will appear as a clear indication of what was to come.
We just do not yet know which one.
Right now, however, our confidence is boosted by the fact that during this week we have started to see the altcoin market strengthen relative to Bitcoin.
This is in line with the general "risk-on" sentiment in the investment markets.
The development of the altcoin market could, of course, turn into a similar temporary spike as we saw in mid-April. However, as long as they strengthen relative to Bitcoin, it is difficult for us to hold anything other than strong optimism as our baseline expectation for the crypto market.
The financial markets have been in a truly exuberant mood in recent weeks, and the technology sector in particular has been running very hot.
Amidst such a stock market rally, it might feel a bit odd to highlight gold, traditionally considered a conservative safe haven,as a particularly interesting investment opportunity.
However, we present a couple of observations that we believe suggest gold should not be completely ignored over the coming weeks.
Since the beginning of 2024, we have lived in a trend where the S&P 500 index, despite its wild bull market driven by the AI boom, has weakened relative to gold. This weakening is illustrated below as the SPX/GLD ratio.
From the graph below, we can in turn see how, over the past two years, each of the strongest upward moves in the S&P 500 index has brought the SPX/GLD ratio close to its 200-day moving average, falling slightly shorter each time.
We can also see that the AI-driven stock market rally of recent weeks has brought the ratio just below the 200-day moving average.
To be clear about a couple of things:
There are no guarantees that gold's outperformance relative to the S&P 500 index will continue.
There is no specific reason why this ratio should reverse exactly at the 200-day moving average.
It is good to be aware, however, that since the beginning of March (i.e., the start of the Middle East conflict), the S&P 500 index has strengthened by 24% relative to the price of gold in just two months.
After such a large and rapid counter-trend move against the longer-term trend, we believe we must slowly allow for the possibility that, at least in the short term, we could once again see gold outperform the stock market.
Gold's dollar price also currently gives reason for budding optimism. Viewed on an hourly basis, the price has started to paint higher lows and higher highs.
The $4,900 level can be considered a significant watershed. Breaking above this level would turn the outlook unequivocally bullish. We are currently about 3.5 percent away from this level.
On the other hand, the price dropping below $4,500 would serve as a clear invalidation of the entire hypothesis of gold's strong performance.
Since the general sentiment in the investment markets is strongly "risk-on" right now, we consider it very possible that we could also see silver outperforming gold.
From the graph below, it can be seen that the SILVER/GOLD ratio is currently right at the level of the April local peak.
Breaking above this level would reinforce our expectations of precious metals outperforming the equity markets.
If, conversely, we plot silver futures against S&P 500 futures, a more optimistic interpreter could at least see some sort of triple bottom and a potential budding trend reversal.
Alongside precious metals, we encourage keeping an eye on other metals as well.
The prices of both copper (WisdomTree Copper, COPA) and rare earth metals (VanEck Rare Earth and Strategic Metals, VVMX) are currently near their multi-year highs, and the momentum for both is strongly positive.
We acknowledge that our analysis is still a bit early, and we have to rely on fairly weak signals for now.
The stock market is currently in a strong uptrend that has not yet shown signs of even slowing down, let alone reversing.
After such a strong stock rally, however, we consider it justified to proactively start scouting where the next best opportunities might be found. Right now, metals look quite interesting.
We will continue to monitor the market development of equities, metals, and cryptocurrencies alike, and we will keep you updated in Kvarn Pulse newsletter, 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 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.
The S&P 500 climbed to fresh record highs even as headlines remain dominated by geopolitical tension, surging oil prices, and broader macro uncertainty. For now, the market’s message is clear: AI-driven risk appetite is still leading the way — and the next question is whether crypto will follow the rally.
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