"Dance while the music plays." The S&P 500 has just completed a 9-day rally—the longest since 2024—driven by a strong U.S. labor market report and upbeat earnings from tech giants. Among the 31 previous rallies of similar length, this one in May was the most profitable. The broad market index climbed 10%, fully recovering losses incurred since America's Liberation Day.

S&P 500 9-day rally performance

Why is the S&P 500 rising when major players, heeding recession warnings from Goldman Sachs and Apollo Global Management (estimating a 45% and 90% chance of recession in the next 12 months), remain on the sidelines? And how long can this continue?

The answer is clear: the crowd is the main engine behind the U.S. stock market rally. But trying to go against the crowd is like attempting to stop a speeding tram with your bare hands.

Even the smallest good news is seen as a reason to buy. Whether it's a headline that Washington is seeking a way to begin talks with Beijing, news that China has unilaterally lifted a quarter of its tariffs on U.S. goods, or Donald Trump suggesting that the 145% tariffs might not be that high in the end—any of these spark bullish sentiment. Add pleasant surprises from the U.S. labor market and big tech earnings, and the picture becomes decisively bullish. Is it really surprising, then, that the S&P 500 has staged a 9-day rally?

The dynamics of the winning marches of the S&P 500

However, one shouldn't be overly enthusiastic about the jobs data.

Layoffs of government employees by Elon Musk's Department of Efficiency won't be fully felt until September since many of the dismissed are still counted as employed due to receiving unemployment benefits. The front-loading of U.S. imports has fueled hiring in service sectors, while immigrant deportations have artificially lowered unemployment by shrinking the labor force. The U.S. labor market is a colossus with feet of clay—and the S&P 500 will soon realize it.

The same goes for the U.S.-China trade war. Donald Trump wants revenue from tariffs and increased purchases of American goods. On the other hand, Xi Jinping demands a unilateral lifting of draconian import tariffs. The goals of both sides are fundamentally opposed, meaning the negotiations will be tough.

The tech sector's earnings strength was interpreted as a signal of U.S. companies' resilience to the tariff environment.

But the worst is yet to come. It takes time to fully grasp how supply chain disruptions impact the economy and corporate profits—and the bears still have that time on their side.

Technically, on the daily chart, the S&P 500's 1-2-3 pattern led to a breakout above key moving averages.

This signals bullish strength and raises the likelihood of a resumed uptrend. The red line at 5695 is critical. If buyers fail to settle there, it will trigger profit-taking from longs built up from the 5400 level and possibly a reversal. Conversely, a successful breakout above this resistance will justify building up long positions further.