May Outlook: Volatility Fades, Uptrend Restored, 2026 Forecast on Track By: Jeffrey A. Hirsch & Christopher Mistal | April 23, 2026 | Email | Print

The Iran war appears to have pulled the Worst Six Months soft patch and 4-Year Cycle Weak Spot (midterm Q2-Q3) forward. S&P 500 bottomed March 30 at 6343.72, down 9.1% from the January 27 all-time high, and has already erased the entire decline. As of the April 22 close at 7137.90 — a new record — the index is back at fresh highs, blowing through several resistance levels in the process after bouncing off technical support levels we highlighted. NASDAQ at 24,657 is also at a record and DJIA at 49,490 is just 1.4% below its February 10 ATH. The Best Six Months MACD Sell signal hasn’t triggered. As of today’s close, it would take a DJIA drop of over 6.7% and S&P 500 over 7.7% in a single day to trigger. 

 

The Iran ceasefire is holding up, yet the situation is fluid, as it appears there is a leadership vacuum in Iran and struggle for control. President Trump posted this morning that “Iran is having a hard time figuring out who their leader is!” He extended the U.S.–Iran ceasefire indefinitely on April 21, citing a “seriously fractured” Iranian government and a request from Pakistan, which continues to mediate. The original two-week truce brokered April 8 was set to expire April 22. It is extended without a new deadline, though the White House has signaled a small window for Iran to produce a unified proposal.

 

The blockade on Iranian ports remains in place. The Strait of Hormuz remains the leverage point. Hostilities have largely halted on the main front, with sporadic violations. The market has largely moved on and clearly expects a resolution at some point over the next few months, if not sooner. However, it is likely to mark time and move sideways, bouncing around through the 4-Year Cycle Weak Spot and Worst Six Months as the conflict in the Mideast works toward a resolution with likely setbacks and the midterm election politicking ramps ups. 

 

 

Our bullish forecast for 2026 has not changed. Base case for 2026 remains 8-12% full-year gains. Typical midterm Q2-Q3 weakness likely came early in Q1 this year as the new Trump Presidency Seasonal Cycle we discovered looks to be in play again. It’s uncanny how this seems to be a replay of not only last year, but a recurring pattern where President Trump has this penchant for stirring things up in Q1. Then negotiating and working the news flow to drive the market higher from Q2 through yearend. 

 

It was early in the morning on March 23 when the 5-day delay was announced that we had the epiphany to investigate this TACO Trade seasonal pattern of Q1 shock, Q2-Q4 awe. Five Trump presidency years — 2017, 2018, 2019, 2020 and 2025. Q1 turbulence, then a sustained rally into year-end. Art of the Deal, seasonal edition.

 

 

Adding the five Trump presidency years to our S&P Midterm Election Year Seasonal Pattern Chart below highlights the market’s strength and how we have so quickly come back in line with our STA Aggregate Cycle and 6th Year of Presidency trends, putting the old school bearish Midterm Election Year pattern that many were anticipating this year on the back foot.

 

 

Several positive market maneuvers happened in rapid succession. The December Low Indicator (DLI) which triggered in March on both DJIA and S&P 500 — a rare March trigger, has historically had a shallower follow-through when paired with a positive January Barometer. Prior March triggers averaged only –8.12% additional drawdown. This year's drawdown has been 9.1% on the S&P from peak to the March 30 low. Most importantly though, as you can see in the chart below is how DJIA quickly erased the loss and reclaimed the December Low Cross level and rallied to near record levels again. This fast recovery is precisely what we look for after a DLI trigger to signal a green light. The bullish history of a positive January Barometer lends further support to the bull case – S&P 500 is higher the next 11 months 87% of the time after a positive January, average gain 12.2%.

 

 

Trend is far more important than magnitude or level when analyzing and evaluating these seasonal charts and historical analogs. We have updated the S&P 500’s performance before and after the start of crises. The S&P’s quick recovery to pre-crisis levels and new all-time highs has been positive historically. But as this graph illustrates, after the initial shock and selloff, once the bounce back recovery occurs the market tends to mark time over the next few months as the crisis resolution plays out. This lines up with the seasonal weakness associated with the Worst Six Months and the 4-Year Cycle Weak Spot.

 

 

This has also been one of the best April starts in history. S&P 500 was up 7.57% through the first 10 trading days of April — the 2nd best April start since 1950. When April started this strong the rest of the year was higher 20 of 24 years, 83.3% of the time, averaging +10.8%. Full years were positive 22 of 24, 91.7%, averaging +16.2%.

 

 

Current market action is reminiscent of last April when volatility receded after the Liberation Day tariff tumble and we began to get constructive on the market. In mid-May 2025 we deemed the technical breadth thrusts were verified and the market was off to the races. By the end of June we expected the rally to take us to new highs before a Q3 pullback. New highs were reached though the pullback came in early Q4. 

 

This year the market has reversed all the losses and moved to new highs even faster. Of the major averages only DJIA has not hit a record. But the stodgier old Papa Dow lagged the recovery last year as well. As you can see in the chart below DJIA bounced right off the 45000 support we noted that ran across the old highs from late 2024 and early 2025. 

 

S&P 500 found support in that 6300-6400 zone we noted last issue near last summer’s July peak and the late-August and early September lows. Now that we’ve cleared the January-February 2026 triple-top resistance at 7000 the new support zone is 6900-7000 between the late October 2025 high and the Q1 2026 highs. 

 

NASDAQ found support above the 20500 level around 20700 where that one-day correction transpired on August 1st last year. New support is around 24000 at the old highs from October 2025 and January 2026 that we just took out.

 

 

 

 

VIX closed at 19.31 today below the 20-30 nervous zone that concerns us. For context, VIX in the high teens to low twenties was normal throughout the 1990s bull market. And the direction is down from the 25–30 range that prevailed through March. Residual volatility here reflects headline uncertainty, not systemic stress. VIX is also non-directional and also implies upside volatility. We may not have reached extreme capitulation levels, though some other contrary indicator fear indexes did reach extremes such as the CNN Fear Index hitting 9 intraday at the end of March. Sustained bottoms don’t require complete market panic and the selloff itself has already been reversed.

 

 

Our Best Six Months Seasonal MACD Sell Signal has not triggered yet. The Tactical Switching Strategy remains in force — we hold DIA, SPY, QQQ, and IWM until the Seasonal MACD Sell signal triggers. The criteria to trigger a sell signal is a 12-26-9 MACD crossover on or after April 1 on both DJIA and S&P 500, with both confirming. As of today’s April 23 close, DJIA would need a 6.7% single-day drop and S&P 500 a 7.7% drop to trigger a negative crossover sell signal. We are nowhere close. Continue to hold Best Months positions. We will send a Special Email Alert when the signal triggers.

 

The bearish narrative has been invalidated by powerful price action and strong market breadth. Recession calls, credit-stress calls, oil-shock-crushes-the-economy calls have all failed to materialize in the tape or the data. Our base case scenario for annual gains of 8-12% remains intact. Weak seasonal forces, uncertainty in the Mideast and surrounding the midterms are expected to weigh on the market for a few months before we hit the Sweet Spot of the 4-year cycle in Q4 and climb to significant new highs. Should the Iran conflict come to an expeditious resolution the market will likely be off to the races again.

 

(Disclosure note: Officers of Hirsch Holdings Inc held positions in DIA, IWM, QQQ, and SPY in personal accounts.)

 

 

In just a few weeks DJIA has nearly fully recovered from the losses inflicted by the Iran War. As of today’s close, DJIA is up 9.2% from its March 27, closing low, up 6.4% in April, and up 2.6% year-to-date. DJIA has also jumped back above its 50- and 200-day moving averages (1). The pace of the recovery has been brisk, but April is DJIA’s second best performing month of the year over the last 76 years.

 

DJIA’s sharp reversal in momentum has been confirmed by both slower and faster moving MACD indicators (2). Both MACD indicators were positive on April 1 and have remained so throughout the month. The strength and magnitude of DJIA’s gains have pushed both MACD indicators above the zero line. This is an encouraging setup for the Seasonal MACD Sell signal as new crossovers above the zero line have historically been more reliable indicators/confirmations. 

 

 

After declining during 10 of 13 weeks earlier this year, DJIA has logged three straight weekly advances of 3% or more (3). This is only the second time since 1950 that DJIA has achieved this and the last occurrence was in late May/early June 2020. After such a move, it would not be out of the question for DJIA to pause to consolidate the gains. This is likely what is happening this week in addition to the overall market digesting the latest Iran war headlines.

 

As impressive as DJIA’s recent gains have been, S&P 500 (4) and NASDAQ (5) have been even stronger. S&P 500 has been up 3.4% or more for three weeks in a row and NASDAQ has been up over 4.4%. Both have also closed at new all-time highs. Here again, some period of consolidation for S&P 500 and NASDAQ is likely. However, recent strength and the current trend suggest that the path of least resistance remains higher.

 

Market breadth over the last three weeks has been solidly positive with Weekly Advancers outnumbering Weekly Decliners (6) by over two to one. Should the market continue to consolidate this margin is likely to retreat, but as long as Weekly Advancers remain in the majority the market’s current bullish trend is likely to remain intact.

 

Bullishly, there has also been a corresponding improvement in the number of New 52-week Highs over the past three weeks. After falling to just 151 during the first week of April, New 52-week Highs nearly doubled to 284 last week (7). The retreat in New 52-week Lows has been even more impressive over the same period, dropping from over 300 to just 59. Looking ahead, a steady expansion in the number of New 52-week Highs would be supportive. New 52-week Lows are not likely to fall much further, but fewer would be welcome.

 

Inflation expectations have moved higher as crude oil prices linger between $90-100 per barrel. This has greatly dimmed the near-term prospects of a Fed interest rate cut, which has kept the 90-day Treasury yield anchored right around 3.62%. Thus far, it appears the bond market is viewing this inflation pressure as likely limited to the near-term as the 30-year Treasury yield (8) has stabilized around 4.90%. As long as yields remain relatively stable (or decline), then the stock market is likely to remain positive. A meaningful move higher in Treasury yields could have the opposite impact.