A Market That Has Flipped the Script
Something striking has happened in equity markets since the recent ceasefire between Iran and the broader region. Despite a steady drip of unsettling headlines — including the capture of an Iranian cargo ship over a disputed blockade and signals that talks are now resuming through Pakistani intermediaries — the market has rallied virtually every day and pushed to fresh all-time highs. Even when fresh news of tanker incidents arrives over a weekend, indices barely flinch.
This is the definition of a script flip. The same headlines that would have triggered sharp selloffs only weeks ago are now being absorbed and dismissed. The market appears to be operating on the assumption that, even if there is another deferral or delay in the ceasefire process, the worst of the geopolitical risk has already been priced in. As long as there is incremental progress and no major escalation, dips are increasingly being treated as buying opportunities rather than warnings.
The Polarity Principle and the New Floor at 7,000
The S&P 500's 7,000 level had functioned as a stubborn ceiling for some time. Index advances kept stalling there, only to fail and roll over. But after that level was decisively broken, the technical principle of polarity comes into play: an old ceiling, once breached, often becomes the new floor. With the index now roughly 150 points above that level, any pullback toward 7,000 should be viewed as a re-entry zone rather than a reason to panic.
This is a remarkable shift. The S&P 500 climbed 17% in just 13 days during this run — a velocity matched by only 21 rallies of comparable speed in living memory. Moves like this happen so quickly that long-term investors who try to time entries and exits almost inevitably miss them. Staying invested, rather than attempting precision timing, remains the more reliable approach.
Why Historical PE Ratios Miss the Point
A common critique of the current rally is that the S&P trades at roughly 21 times earnings while small-cap value indices like the Russell trade at around 13 times — making the broader market look expensive by comparison. But for those who lean on technical analysis, historical price-to-earnings ratios are not a primary input into decision-making. Nvidia, for instance, currently trades at a PE of roughly 22 to 23, which by its own historical standards is actually cheap. The question is not whether a multiple looks elevated against decade-old norms, but whether the chart and the underlying business momentum line up.
Last week's action reinforced this. Technology resumed leadership, financials kicked off earnings season with five of the six big banks beating expectations (Wells Fargo being the lone disappointment), and the so-called Magnificent Seven names are once again driving the tape. Citi stood out as the strongest of the bank earners, and buying strength rather than chasing lagging value can be the higher-probability trade.
ServiceNow: A Beaten-Down Setup Worth Watching
Among software names, ServiceNow stands out as a contrarian opportunity. The stock sits roughly 36% below its high for the year, with a 52-week range stretching from $81 at the low to $211 at the high. Unlike Palantir, Microsoft, and Meta — which have all reclaimed key moving averages during the recent rally — ServiceNow has not yet participated. It remains stranded well below its 200-day moving average, and it would need to rally roughly 57% just to reclaim that level.
But that is precisely the setup that can attract a violent reversal. If a rising tide finally lifts the boats and the company delivers solid earnings, short-covering and mean reversion can compound rapidly. A break above $105 — with shares recently near $98 in pre-market trading — could mark the beginning of one of those quick, everyone-cover-your-shorts moves that defines the current market. The software sector ETF IGV looked like it was breaking down before holding key levels and erupting higher, illustrating how fast these reversals can unfold.
UnitedHealth: A Multi-Year Downtrend Testing Resistance
UnitedHealth is another intriguing setup. The stock has been mired in a two-year downtrend and has flirted with reclaiming its 200-day moving average twice before — once for five days, once for four — only to fail each time. It is now trading above that level for a fifth consecutive day, with earnings on Tuesday providing the catalyst that will determine whether it finally breaks the pattern.
The stock is roughly flat year to date but still down 28% over the past 52 weeks, leaving plenty of room for reversal. Management is also waiting on cost-related decisions out of Washington that could materially affect guidance. The risk-reward looks attractive. If guidance is positive, the chart suggests a fast move into the gap toward $350 with a possible run to $375. Like ServiceNow, this is a name that can move quickly when sentiment turns.
NextEra: Boring Utility, Powerful Pattern
For investors uncomfortable with whipsaw volatility, NextEra Energy — formerly Florida Power and Light — offers a more sedate path with a meaningful AI angle. Utilities are increasingly attractive as the AI buildout drives unprecedented demand for power generation. The stock has been stuck in a range between roughly $90 and $95 and currently sits closer to the lower end, which improves the risk-reward.
Pulling back the lens to a 10-year monthly chart reveals an inverted head-and-shoulders pattern just breaking out — a constructive long-term setup that points to a target of $120 to $125 over the coming year. Slow, steady, and admittedly boring, but for nervous investors watching every Middle East headline, the predictability is a feature, not a bug. Other defensive names worth tracking include 3M, whose Tuesday guidance will offer a useful read on the broader staples and industrials complex.
The Oil Wild Card
Crude oil at $87 a barrel sits in an uncomfortable middle zone. A single skirmish in the Strait of Hormuz could push it to $100 by midweek. Predicting the geopolitics of who attacks whom is a fool's errand, but the market should be aware that another escalation — particularly a sustained closure of the Strait — could trigger a fresh spike.
The likely scenario is not a one-time catastrophic move but rather "higher for longer." That dynamic shows up in two places that matter to ordinary households: prices at the pump and headline inflation. Getting crude back into the mid to low $70s would be enormously helpful. The hope is that any near-term spike proves transient and oil drifts back below $80 within the next week or so.
A Year-End Target Holding Firm
A year-end S&P 500 target of around 7,200 still looks reasonable, and the index is now within striking distance. Targets are most useful when they are not constantly revised — they provide a directional anchor rather than a moving goalpost. With the market only modestly below that level, the question for the remainder of the year is less about whether the destination is reachable and more about how much volatility investors are willing to absorb on the way there.
In this environment, the playbook is straightforward: respect the new technical floor at 7,000, lean into strength rather than chasing washed-out value, watch for mean-reversion setups in beaten-down quality names, and use boring defensive plays to dampen the noise. The headlines will keep coming. The market, for now, is choosing to look past them.