May 2026 continues to put traders’ resilience to the ultimate test. The market has become a "mirror" reflecting the ongoing geopolitical standoff: while diplomats search for a compromise in the Strait of Hormuz, indices are storming new all-time highs, largely dismissing inflationary risks. Investors are betting on the fundamental strength of the US economy, choosing to overlook the gathering "black swans."
American stock futures are closing the week at record levels. Despite the ongoing war in Iran, the S&P 500 and Nasdaq are demonstrating phenomenal stability.
The AI triumph and rotation. The rally is no longer a "one-way street" reserved for tech giants. We are witnessing a massive influx of "smart money" into the industrial sector. While AI infrastructure leaders like Nvidia and AMD continue their ascent, cyclical companies are catching up, posting explosive gains following their quarterly earnings reports.
The economic paradox. In April, the US economy added 115,000 jobs, nearly doubling market forecasts of 62,000. This confirms that the labor market remains overheated despite the Fed's tightening efforts.
Hawkish backdrop. Robust employment data combined with persistent inflationary pressure from energy prices is forcing markets to price in a potential Fed rate hike later this year.
The situation surrounding Iran remains the primary driver of volatility, frequently forcing instruments to open with significant gaps.
Diplomacy under fire. Despite US strikes on missile positions in Iran—retaliation for attacks in the Strait—President Trump has confirmed that the ceasefire remains "in effect." Markets are now pinning their hopes on a new round of negotiations set for May 15.
The oil retreat. WTI crude plummeted 7% (falling below $95) on rumors of de-escalation. The blockade of the Strait of Hormuz since February has already removed 14 million barrels per day from the global balance; consequently, any hint of reopening the passage triggers massive counter-moves.
The US Dollar Index (DXY) is holding steady around the 98.00 mark, balancing between positive economic data and the specter of currency interventions.
Gold at the peak. The precious metal surged above $4,720 per ounce (+2% for the week). Investors are utilizing gold as a hedge in case de-escalation falters and inflation continues its climb.
Currency maneuvers:
EUR/USD. The pair tested 1.1800 on peace rumors but quickly retreated. Stagflation risks in Europe and Trump’s threats to hike auto tariffs to 25% keep the euro on the defensive.
USD/JPY. The market is fixated on Scott Bessent’s upcoming visit to Japan. Speculation is mounting regarding a coordinated intervention (akin to a modern-day Plaza Accord) to weaken the dollar.
The current market is a landscape defined by rapid movements and short-term horizons.
S&P 500. The uptrend remains intact as long as corporate earnings outweigh the fear of Fed policy. However, "long-term" positioning is currently hazardous due to the unpredictable nature of weekend gaps.
Risks. The primary risk remains a sudden collapse in Iran negotiations, which could send oil prices soaring and derail current risk appetite.
While the world scrutinizes headlines about missiles and diplomacy, Alex Gerchik remains committed to his core principle: "The market is not about the news; it’s about levels and energy."
In an environment where instruments open with gaps and volatility is off the charts, the survivors are not those who guessed the news correctly, but those who possess a bulletproof system. As the Boss says: "Don’t try to trade the chaos. If you don't understand the chart—step aside. The market will always be there, but you only have one deposit."
In such a "mad" market, your only salvation is an algorithm and a clear understanding of where the institutional players are defending their positions.
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