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The market is still leaning on optimism
The S&P 500 is trading as if the worst of the Iran shock will stay contained.
That does not mean the risk is gone. Oil is still elevated, shipping disruption has not fully cleared, and the ceasefire story remains fragile. But price action is showing that investors are giving more weight to earnings and to the idea that the conflict will not become a much larger economic event.
Tom Lee’s view fits that backdrop
Tom Lee, Fundstrat’s co-founder and head of research, has stayed constructive on U.S. equities. Recent coverage of his view has kept the 7,300 area in focus for the S&P 500.
In the CNBC interview referenced here, the key point was that retail investors did not treat the Iran selloff like a normal buy-the-dip move. Fuel-price fears, war uncertainty, and policy confusion kept many investors cautious. His argument is that this caution can later become fuel if the market keeps holding up.
What 7,300 would actually mean
On the daily chart, 7,300 works as an upside scenario, not a fixed destination.
If the index gets there, it would reflect a market still leaning on earnings, still trusting the ceasefire narrative, and still not fully saturated with retail participation. It also frames the downside more clearly. A later 15% pullback from that area would bring the S&P 500 back toward the 2025 peak region around 6,000 to 6,100. That would be a meaningful correction, but not automatically a break in the broader trend.
Earnings are still doing most of the work
The support under this rally is still earnings. Profit expectations for 2026 have moved higher again, and several banks have lifted their year-end index targets as technology-led growth assumptions improved.
That is the main reason equities have stayed firm even with oil and geopolitics still sitting in the background. For now, the market is choosing to trust profit growth more than macro noise.
Speculation is starting to show up again
There is also a less comfortable layer underneath the rally.
The move in Avis Budget says a lot about current risk appetite. The stock has become one of the market’s clearest short-squeeze stories, driven by a very high short base and a tightly held float.
That kind of move does not define the whole index, but it does suggest optimism is no longer limited to large-cap quality and earnings revisions. Speculation is starting to show up more openly again.
The chart still leans bullish for now
The 4H 50 EMA band has been acting as a clean support and resistance guide, and it is now sitting close to 7,000. As long as that area holds, it is difficult to argue that the short-term trend has rolled over.
Below that, 6,800 remains the more important support zone. That area lines up with the 1D 50 EMA, the Monday gap-down zone around 6808.3 to 6769.2, and the Value Area High from the rally that began near 6,300. The lower side of the daily band near 6,600 adds another layer beneath. In practice, the market still has structure underneath it. The upside may be carrying a lot of hope, but the chart has not broken.
The next test is earnings
A heavy earnings slate puts the focus back where it has been for most of this rally: results, guidance, and whether large-cap leadership can keep carrying the index.
If that part holds up, Tom Lee’s framework stays in play. If it starts to slip, a market already priced for a decent amount of good news may become less tolerant very quickly.
Final take
The rally is being supported by improving profit expectations and by a market that wants to believe the geopolitical shock will stay contained.
Retail still appears more cautious than price action suggests. If that gap closes, there is room for the S&P 500 to stretch higher first. If it does not, the index is already high enough that the burden of proof starts to rise.
DISCLAIMER: For educational purposes only. Trading comes with substantial risk, leading to possible loss of your capital. Traders are advised to do their own due diligence before investing.
