Remember last week when the market decided to throw a party because Iran said the Strait of Hormuz was open again? Yeah, about that. Jefferies’ Michael Toomey is basically the guy at the party who notices the keg is empty and the DJ just left—and he’s got receipts.
After weeks of Iran-war chaos that had traders sweating through their shirts, the S&P 500 and Nasdaq decided to go full celebration mode. Stocks rallied hard, hitting all-time highs, and everyone was ready to declare victory. But here’s the thing: Toomey thinks we’ve already captured the good stuff, and the market is about to hit a wall.
“I think we have captured the rally (and then some) that you would expect to see after the stress signals from the past month,” he said. Translation: the easy money’s been made, folks.
So what’s got Toomey convinced the party’s ending? He’s watching five technical signals that are basically screaming “consolidation incoming.”
First up: Call volumes are absolutely bonkers. We’re talking five-year highs. When everyone’s buying call options (basically betting on stocks going up), that’s usually a contrarian signal—meaning the crowd might be wrong. The Magnificent Seven tech stocks are seeing call volumes at their highest in a year. When everyone agrees, the market tends to disagree.
Then there’s the RSI—the Relative Strength Index. This momentum gauge measures whether something’s overbought or oversold. The S&P 500’s RSI jumped 46 points in 13 days. That’s the biggest move in over 30 years. Toomey called it “the most violent RSI move ever.” Spoiler alert: violent moves don’t usually end well.
About 23% of tech stocks are now overbought (RSI over 70), which is basically the market equivalent of eating an entire pizza and then wondering why you feel sick.
The S&P 500 just had three straight weeks of 3%+ gains. In 75 years, that’s only happened twice—during the early 80s recovery and the pandemic bounce. The Nasdaq hit its longest win streak since 1992. These aren’t normal times, and the market knows it.
Finally, the S&P 500 is up 9% since April started. That’s more than five times the historical average for April (which is usually around 1.7%). We’re not just beating the average—we’re lapping it.
Here’s the reality: markets don’t go straight up forever. They consolidate, they correct, they breathe. The Iran situation is still a mess—the ceasefire is nearly over without a deal, and Iran just said the Strait is closed again. That’s the kind of headline that can flip sentiment on a dime.
Toomey isn’t saying the bull market is dead. He’s saying we’re probably due for a pause. The technical signals are flashing yellow, not red. But after a week of relief rallies and all-time highs, a little consolidation might actually be healthy. It’s not a crash—it’s just the market catching its breath before the next move.
