It Was a Nice Bounce
Dan Russo, CMT
April 6, 2026
Last week, we argued that equities were set up for a bounce. Markets do not move up or down in a straight line. Elevated readings in the S&P 500 Volatility Index (VIX), combined with resilience in Transportation stocks, set the stage for a pop. And pop we did.
Now the question becomes, “what’s next?”
Bulls want to see follow-through this week. Bears are looking for the rally to stall right here.
S&P 500
The S&P 500 staged a strong rally in the holiday shortened week, but I always focus on where rallies stop. Last week’s strength carried the index right up to the underside of the 60-week moving average.
The market enters the new week at a key inflection point.
Source: Optuma
NYSE Advance/Decline Line
Strong price action last week was accompanied by an improvement in the NYSE Advance/Decline Line. That said, the A/D Line remains below the, now flat, 43-week moving average.
Bulls need to see continued improvement here. Weakness from here, while the S&P 500 remains below an important trend level, would strengthen the case for further downside.
Source: Optuma
Dow Jones Transportation Average
Once again, the Dow Jones Transportation Average was the star of the show. This key intermarket indicator rallied sharply and closed higher for a third consecutive week. Price remains above the rising 27-week moving average, keeping the trend firmly bullish.
Source: Optuma
Commodities
This remains the biggest concern. The iShares S&P GSCI Commodity-Indexed Trust (GSG) continues to trade in a parabolic advance. The longer and more persistent this move becomes, the more likely higher commodity prices feed through to inflation measures.
It is worth remembering that a key pillar of the bullish equity argument was expectations for rate cuts later this year. More strength here lowers those expectations further.
Source: Optuma
Two-Year Yield vs. Fed Funds
Despite last week’s equity bounce, the bond market is not making room for cuts. The two-year Treasury yield remains above the Effective Fed Funds Rate.
That is a problem for the bullish narrative.
Source: Optuma
Final Thoughts
It was a good bounce, but bounces do not equal bottoms. The S&P 500 has rallied back into resistance, breadth is improving but is still not great, and commodities continue to apply pressure on the inflation and rate-cut narrative. The bulls are not out of the woods yet.
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