S&P 500: Yardeni says two trading days will test his bottom call

Ed Yardeni’s team said the S&P 500 appears to have registered a trough after a 9.1% pullback from its January 27 record high, and that market action over the next two trading days will be crucial to validating that assessment. The call rests on sharply depressed sentiment indicators that Yardeni regards as reliable contrarian buy signals when they reach extreme lows.

According to Yardeni, a strong equity rebound that began on Tuesday was driven by reports suggesting the US found an exit ramp from the conflict with Iran, and President Donald Trump later confirmed a planned withdrawal within two to three weeks. Subsequent reports that Iran and Oman are drafting a restrictive navigation protocol for the Strait of Hormuz were taken by traders as a sign that managed transit arrangements may be under discussion rather than a full reopening.

From a market-structure perspective, Yardeni highlighted that consumer discretionary, financials and information technology have led the post-dip recovery, and that several breadth and technical measures have improved since the low. He cautioned, however, that volatility remains elevated and the low could be retested, meaning confirmation requires follow-through in volume and sector participation.

The episode underscores how geopolitics and energy risks can quickly alter risk premia and test the resilience of the US economy. Yardeni noted that if the conflict ends on the timeline cited by the administration, the economy should weather the shock; but a protracted disruption or spike in oil prices would raise downside risk to growth and corporate earnings. Portfolio positioning and liquidity management are therefore central themes for investors in the near term.

Market participants say the next two trading days will be watched for confirmation signals such as expanding breadth, rising volumes on up days and improvement in investor sentiment surveys. If these conditions materialize, Yardeni’s bottom call will gain credibility and could prompt tactical buying; if not, the market may revisit lower levels and reinforce caution among allocators.