Key Takeaways

• S&P 500 and Nasdaq extended their rally, approaching an eight-day streak fueled by dip buying.
• Investors used recent pullbacks to re-enter the market, increasing upward momentum.
• Economic data sent mixed signals but did not dampen overall optimism.
• The technology sector outperformed, with growth stocks and large-cap tech leading.
• Attention now turns to upcoming earnings reports that will influence the market’s next move.

Introduction

On Wednesday, the S&P 500 and Nasdaq advanced as disciplined dip buyers returned, positioning both indexes for an eighth consecutive day of gains. This rally, supported by renewed confidence following recent pullbacks and robust tech sector performance, demonstrates ongoing investor appetite for risk as markets anticipate key earnings reports that could test this upward trend.

Rally Overview: S&P 500 and Nasdaq Extend Streak

The S&P 500 rose 1.2% on Thursday, reaching a record high and completing eight consecutive sessions of gains. The Nasdaq Composite climbed 1.7%, delivering its strongest weekly performance since November 2023.

This sustained rally followed a period of consolidation earlier in the month. Both indexes overcame key resistance levels, accompanied by a 15% increase in trading volume over the 30-day average.

Market breadth broadened significantly, with nearly 70% of S&P 500 stocks trading above their 50-day moving averages. This suggests the rally is widely supported, not concentrated in a few large-cap names.

Dip Buying Drives Momentum

Institutional investors adopted classic dip-buying strategies, increasing positions during minor pullbacks throughout the week. Several fund managers stated they took advantage of Tuesday’s 0.4% decline to enter at more favorable prices.

This pattern reflects disciplined accumulation rather than impulsive buying, with strong inflows noted particularly during morning weakness. It aligns with traditional institutional behavior ahead of quarterly earnings season.

Consistent positive divergence in the advance-decline line and a steady rise in up-volume versus down-volume confirm broad, institutional participation in the rally.

Sector Performance Breakdown

Technology stocks drove the market higher, with the sector gaining 2.3% as semiconductor and software companies delivered robust advances. Chipmakers stood out, with some rising over 3% after positive analyst commentary on AI infrastructure.

Financial stocks were the second-strongest group, up 1.8%, as banks benefited from a steepening yield curve. Regional banks outperformed larger peers, indicating investor interest in mid-cap financials.

Energy was the sole declining sector, falling 0.7% as oil prices weakened on higher inventory data. Defensive sectors like utilities and consumer staples lagged but remained positive, suggesting investors currently prefer growth-oriented sectors.

Technical Analysis Perspective

The S&P 500’s breakout above the 5,500 resistance level marked a significant milestone, drawing attention from technical analysts. This move, confirmed by increasing volume, suggests strong underlying momentum.

The Relative Strength Index (RSI) for major indexes surpassed 70, indicating overbought conditions and potential for short-term exhaustion. Still, history shows indexes can remain overbought for extended periods during sustained uptrends.

A pattern of higher lows and higher highs across timeframes reinforces the prevailing uptrend. The recent crossing of the 20-day above the 50-day moving average establishes a bullish technical foundation that often precedes continued gains.

technical analysis

Market Catalysts and Sentiment

Lower inflation expectations have become a key market catalyst, reinforced by recent economic data supporting the possibility of Federal Reserve policy easing. The latest Producer Price Index fell below consensus estimates, strengthening a disinflation narrative.

Institutional sentiment shifted positively, according to the latest Bank of America fund manager survey, as cash levels dropped from 4.8% to 4.3% with managers moving capital back into equities. This marks a notable change from the more cautious approach seen last month.

Options data shows the put-call ratio declining to 0.75, indicating increased bullish sentiment that has not yet reached extreme levels. Meanwhile, the VIX volatility index fell below 15, reflecting reduced market anxiety even as valuations remain high.

Trading Volume and Market Breadth

Thursday’s rally featured significantly higher trading volume compared to the prior session, with 8.2 billion shares traded across U.S. exchanges. That’s an 18% increase over the 20-day average.

Market breadth improved steadily during the rally. On the NYSE, advancing issues outnumbered decliners by a 3-to-1 margin. The percentage of stocks marking new 52-week highs reached 8.7%, the highest since January.

Small-cap stocks have become more active, with the Russell 2000 gaining 1.5%. This broader participation suggests the bull trend is maturing and now includes a wider range of stocks, not just the largest technology names.

Key Earnings Influences

Several high-profile technology firms posted quarterly results above analyst expectations, driving sector optimism. These strong reports helped to justify higher valuations and supported further gains.

Financial companies also delivered stronger-than-expected net interest income, showing banks are managing the high-rate environment better than previously anticipated. Credit quality remained stable, easing worries over consumer weakness.

Initial earnings tallies indicate a 72% beat rate for earnings and a 68% beat rate for revenues among early S&P 500 reporters. Although this covers just 9% of the index so far, both rates are outpacing the five-year average.

Trading Strategy Considerations

The current technical setup presents opportunities and risks for disciplined traders. While the dominant trend remains bullish, the extended rally suggests adopting careful position sizing instead of aggressive new investments.

Swing traders should consider partial positions with firmly defined stop levels rather than full-sized commitments at current prices. Nearby support levels offer practical points for risk management when initiating new trades.

Ongoing sector rotation favors cyclical growth sectors over defensive holdings. This suggests a strategy emphasizing technology, financial, and consumer discretionary shares, while limiting exposure to utilities and staples.

trading strategies

Conclusion

The S&P 500 and Nasdaq’s eight-day rally is driven by broad participation, sector leadership, and disciplined institutional involvement. Coupled with favorable earnings and technical signals, recent gains reflect conviction over speculation. What to watch: earnings reports from major index components in the coming days will be crucial for sustaining momentum and assessing the durability of market breadth.

trading psychology