Weekly Market Outlook – A FOMO Rally is Still a Rally... Until It Isn't

Against the odds (and despite the not-so-great start), the market mustered another win last week. That’s the sixth one in a row, with last week’s 2.3% gain from the S&P 500 re-accelerating the rally that began all the way back in early April.

Oh, it’s gotten completely nuts. The six-week gain has carried stocks up to the tune of 17, reaching new record highs in the process. The move has also blown past most likely technical ceilings, leaving indexes in no-man’s land with no framework for what’s likely to come next. The volatility indexes also remain suspiciously subdued, as does the volume behind the big gains themselves. There’s also now a massive amount of room and reason for stocks to roll over. The trick for the bears just seems to be getting that ball rolling. The momentum is clearly bullish in the meantime.

We’ll take a detailed look at the whole thing in a moment. Let’s first run through last week’s biggest economic announcements and the preview what’s in the lineup for this week.

Economic Data Analysis

It wasn’t last week’s biggest news, but last week’s update of February’s and March’s sales of new homes helps us get a better feel for the current condition of the real estate market. Simply put, sales of newly-built houses improved quite a bit from January’s lull, and kept going in March. Even so, the current pace is still right around the tepid levels we’ve seen since 2023.

New, Existing Home Sales Charts

Source: Census Bureau, National Assn. of Realtors, TradeStation

The National Association of Realtors will report April’s existing-home sales on Monday of this week, rounding out the real estate purchase picture. Analysts are looking for a slight improvement on March’s figure, but certainly not enough to shake this data out of the low rut it’s been in since 2023 as well.

Also on Tuesday we got April’s services index update from the Institute of Supply Management. It slipped a little, rather than inching up as expected. Even so, the data remains above the pivotal 50 level.

ISM Services and ISM Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

Last week’s big news of course was Friday’s jobs report for April, which was responsible for most of that session’s 0.84% advance. The economy didn’t quite match March’s upward-revised payroll growth figure of 185,000 jobs, but the 115,000 it did create was far better than the 55,000 jobs forecasters were calling for. It was certainly enough to hold the nation’s unemployment rate at the expected 4.3%.

Payroll Growth, Unemployment Rate Charts

Source: Department of Labor, TradeStation

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

This week’s going to be another important one, data-wise. Following Monday’s look at sales of existing homes, on Tuesday we’ll hear last month’s consumer inflation information, followed by producer inflation rates for April on Wednesday. You may recall all of them edged higher in March, largely stemming from the fallout of the conflict in Iran. Things likely worsened, price-wise, in the meantime.

Consumer, Producer Inflation Rate Charts (Annualized)

Source: Bureau of Labor Statistics, TradeStation

Look for last month’s retail sales reports on Thursday. These numbers have been moving higher too, accelerating in March due to higher prices. Economists think the pace of the spending uptick has cooled off as quickly as it materialized, but forecasts for April still suggest growth in consumer spending is in the cards.

Retail Sales Charts

Source: Census Bureau, TradeStation

Finally, on Friday we’ll get last month’s industrial production and capacity utilization data from the Federal Reserve. Both bumped into a small headwind in March. Analysts, however, are modeling modest improvements for both this time around; there’s not enough change here either way to worry too much about.

Industrial Production, Capacity Utilization Charts

Source: Federal Reserve, TradeStation

Just keep in mind that the ISM’s manufacturing report indicated reasonable, steady strength on this front as well.

Stock Market Index Analysis

We’re starting this week’s analysis with a look at the weekly chart of the S&P 500 to put everything in its proper perspective. Already well up for the prior five weeks, the index blew right past an intermediate-term ceiling (purple, dashed) to reach a new record high. The only potential technical ceiling left in play now is the one that extends all the way back to 2023’s peak (light blue, dashed) currently at 7,624. And, as it stands right now, the index is going to test it.

S&P 500 Weekly Chart, with MACD and VIX

Source: TradeNavigator

The same weekly chart shows us something else that’s become more than a little bit odd though. That’s the volatility index, or VIX, at the bottom of the chart. One would think given the depth and speed of the market’s recent gains that the VIX would be testing its absolute lows nearer 12… that, or least continuing -- and even accelerating -- its recent drop. That’s not been the case though. It’s been eerily stagnant.

There is arguably a bullish interpretation here. It suggests traders aren’t even bothering to play a little bit of defense by buying more put options (or selling more call options). We’ve also obviously seen stocks continue to climb while the VIX just drifts sideways at low for a while, as was the case several times between 2023 and 2025.

That’s at tough interpretation to swallow this time around though. We’re now up about 100% from 2022’s bear market low, and the recent rally has not only been oddly huge, but on oddly-anemic volume.

Here’s the daily chart of the S&P 500 to verify that the volume behind the bullish effort since late March has been a low-volume affair, although that’s not the most interesting aspect of this chart. Most noteworthy is the fact that the index has traversed the entirety (and then some) of a moving average envelope in just a few weeks, and when it bumped into the upper boundary it didn’t stop. It somehow accelerated up and into it.

S&P 500 Daily Chart, with Volume and VIX

Source: TradeNavigator

This isn’t exactly unheard of. While an index is more likely than not to pull back when it bumps into an established ceiling, when it defies this more common outcome, it defies it with a vengeance!

Problem? Once this vengeance-driven meltup runs out of gas, it quickly leads into a sizeable correction. When the next correction starts and how far it goes remains to be seen.

Here’s the daily chart of the NASDAQ Composite for what it’s worth. Same story, although more extreme. It rallied 1.7% last week to close 27% above its late-March low. It’s not yet in a position to test its ultimate bull market ceiling extending all the way back to mid-2025 (light blue, dashed). But, that’s all the more bullish.

NASDAQ Composite Daily Chart, with Volume and VXN

Source: TradeNavigator

What’s not bullish here is the why the volume for the composite remains minimal on the way up, and the fact that its volatility index -- the VXN -- almost seems to be edging upward rather than lower.

The ironic problem here is a combination of too much certainty and not enough fear, particularly given the backdrop. Inflation remains above norms, with a conflict in the Middle East that’s one headline away from torpedoing this bullishness. Valuations are also… well, insane. Traders are buying in anyway, mostly out of fear of missing out. That’s enough, but only right up until it isn’t. Once it isn’t, it isn’t in a big way.

The momentum is bullish to be sure. This is a case, however, where the smart-money will wait in the sidelines, mostly waiting for the right time to bet on at least a small correction. Play it by ear after that initial setback takes shape.