Last week, once again we experienced equities markets emotionally rise and fall in quick reactions to headline news reports regarding the status of the Iran war. Specifically, we saw significant positive surges on Tuesday and Wednesday as a result of reports of positive developments between the U.S. and Iran for a ceasefire.
Subsequently, markets opened sharply down Thursday morning in a negative reaction to the comments and tone of President Trump's speech Wednesday evening. But by late Thursday morning, markets quickly regained the opening losses upon a new report that Iran and Oman were drafting protocols for open transit through the Strait of Hormuz.
These positive and negative reactions to headline news reports frankly are another reminder of investors current drastically cautious positioning in the equity markets. With all this noise, many investors naturally expect significant further downside. They point to the nearly 20% decline in the S&P 500 around the same time last year as precedent.
March was an emotionally tough month for stocks. But the S&P 500 fell just 4.6% for the month in the face of all this uncertainty.
So as the second quarter kicks off and we look ahead to April, our view at Cornerstone is that we’re closer to the bottom than those with more dire forecasts. Today we'll explore technical, historical, and fundamental data that help guide us through the current noise.
Technical Support
Before examining the “guiding light” data, let’s review some pieces of the macro picture. First, history shows that big declines are often followed by V-shaped recoveries.
Next, at one point in March, the S&P 500 was down by more than 8% before bouncing back to close down only 4.6%
Third, the U.S. economy is significantly better equipped to handle elevated oil prices comparatively than the rest of the world.
And lastly, there are growing indications that the administration could find a quicker off ramp to this war than many pundits expect. That’s not surprising to us, considering the political ramifications in a midterm election year.
But with all that said, let's first turn our attention to technical support data.
For the S&P 500, the technical support level sits around 6,200-6,300 currently. This is important considering that the index sat around 6,343 last Monday (March 30) and the preceding Friday (March 27).
The S&P 500 then bounced off those support levels with the rally on Tuesday and Wednesday, rising back above 6,500, as of this writing. Thus, we're beginning to see indications from a technical perspective that these support levels may be strong enough to create a near-term floor.
All told, technical analysis tells us the first half of April could be volatile. Stocks could bounce back and forth between these price points, forming a bottom before a V-shaped recovery sometime around April 22.
This technical path aligns with equity markets’ historical average bottoms during wars. Specifically, market bottoms take place within the first 10% to 15% of the total duration of a war:
After the bottom, there is often a sharp, V-shaped recovery:
Obviously, the Iran war’s duration is unknown right now. Still, this historical context shows how markets price in adverse risk early during wars, thus finding their bottom sooner.
This risk aversion is supported by the current equity put/call ratio, which sits at 0.9, the same as last April’s market lows:
This gives a strong indication investors have already prepared for any further downside risks. It’s also a signal that a bottom could already be in place.
If so, it supports the belief that we’re 85-90% through this decline as markets begin to climb the “wall of worry.” While it's clear how investor confidence (i.e.-emotion) is still fading, as always, context matters.
Midterms
When everything feels emotionally chaotic, CFS takes a step back and lets the data do the talking. It’s important to keep in mind that even without the unexpected Iran War in our yearly outlook, we pointed out how 2026 being a midterm election year offered evidence for first half volatility.
Midterm years are the weakest in the four-year presidential cycle:
So, we knew volatility this year wouldn’t be unusual, especially heading into the second quarter:
Looking above, you can see we’re in the middle of the midterm journey. But as markets gain clarity near year-end, bullishness ensues.
Money Flows
As we navigate the near-term ups and downs, we always keep an eye on MoneyFlows’ trusty Big Money Index (BMI), a 25-day moving average of netted institutional investor activity.
Right now, the BMI is at 41.7%, hitting its lowest level since last April, when it hit 35.4%:
Based on this current pace, we may expect to revisit the April 2025 level somewhere around April 8th-10th.
We’ve written recently about the BMI levels of 35% and 25% as key oversold readings. We don’t know if it will hit 25% this year. The last time it did was Oct. 23, 2023, which was 29 months ago.
On average, the 25% BMI level arrives every 18.8 months. So in theory, we’re overdue. If we were to approach the 25% level this year, the current pace indicates that it would arrive around (once again) April 22nd-24th.
As we sit here today, there’s a clear timeline convergence from independent data analysis when comparing technicals and money flows. Identifying this expected market bottom is helpful. As you can see, the forward outcomes after reaching the 35% and 25% levels are meaningful, regardless of timeline:
It’s clear: from a week all the way out to two years, there are significant positive outcomes. The key difference is time.
The 35% level tends to come earlier in a drawdown. The 25% level is much closer to an actual market price bottom.
To illustrate that, you can point to a few recent extreme oversold instances. Look at the depths reached in 2018:
And what it looked like in 2020:
Finally, here is the 2023 variety:
This data further supports that we’re closer to a bottoming and V-shaped recovery than the current forecasters predict. These next couple weeks could still feel the same as the Q1 journey so far as headlines continue to get louder and spike volatility. But that’s when opportunity forms.
It's clear we're in that kind of cycle now. The data points us to a window beginning from now until the fourth week of April.
This is when discipline matters the most, not emotion. Never forget the wise words of a couple of the most famous investing legends:
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