This week saw one of the most epic reversals in the US indices. On Wednesday, the S&P500 added about 9.5% for the day, posting the third largest gain in its 75-year history and rebounding nine-tenths of the decline caused by stiff tariffs.
Market sentiment is still just 16, an extreme fear zone. However, this is a sharp rise out of the single-digit area (3-4 since the beginning of the week). Historically, such bounces in the sentiment index have served as an important signal of a return to growth, at least for the coming days.
Countering the absolute positivity is the example of 2022, when the Fear and Greed Index hit a low in May, and the S&P500 hit a low in October. At that time, there were several waves of declines, each leading to lower lows.
A strong buy signal over the long term requires a change in fundamentals. These could be optimistic agreements on tariffs and the recovery of business optimism.
Technically, the picture is now on the side of optimists. On weekly timeframes, the S&P500 has bounced off its 200-week moving average, an important support line of the last 10 years. The RSI index on this chart has also rebounded from its lowest point since 2020.
-p src=/wp-content/themes/fxpro_news_2025/assets/images/etf/820x312_ETF_2_uk_75_eng.png>However, it's important to remember that market recoveries typically take 2-3 times longer than declines. For example, in 2018, it took 22 weeks of growth to recover from a 9-week decline. The current 7-week downturn may take 17-22 weeks to recover.
The FxPro Analyst Team
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