The S&P 500 jumped 2.91% on Tuesday, closing at 6,528. The Dow gained over 1,100 points. The Nasdaq led with +3.8%. It was the best day for all three indexes since May. 441 of 500 S&P components closed green. Only the utilities sector finished in the red.

What drove the rally

Three things came together. First, Iran's official news agency reported that President Pezeshkian may be willing to end the war with the United States under certain guarantees. Second, the White House signaled that Trump is open to halting military operations and showed flexibility on the Strait of Hormuz, the world's most critical oil chokepoint. Third, Q1 was ending. Portfolio managers who had been sitting on heavy losses rebalanced into the close, adding fuel to the move.

This matters because the Strait of Hormuz has been effectively closed to commercial shipping since the conflict began. That closure drove Brent crude up roughly 55% in March alone, the biggest monthly surge on record. Oil at these levels feeds directly into inflation, which keeps the Fed locked at 3.5-3.75% with no room to cut. Any signal that Hormuz could reopen pulls the pressure out of the entire chain: oil down, inflation expectations down, rate cut odds up, equities bid.

That is why the market moved so hard on what was, at this point, still just a headline.

The quarter in context

Q1 2026 closes in the red. The S&P 500 remains roughly 7% below its late-January record near 7,000. The Magnificent 7 tech stocks lost 13% over the quarter. Brent posted its biggest rise since the Gulf War. European natural gas surged 80%. Global stocks had their worst month since September 2022, with $8 trillion in market cap erased.

This was not a normal quarter. And one session, no matter how strong, does not reverse that.

What the MCO Elliott Wave Model shows

At MCO, we use the Elliott Wave Model to read market structure. The idea behind Elliott Wave is straightforward: markets do not move in straight lines. They move in patterns. Specifically, they tend to move in five waves in the direction of the main trend, followed by three waves of correction against it. Understanding where the market sits within that pattern helps separate noise from signal.

Here is what the model currently shows for the S&P 500.

The index likely formed a meaningful top in January near 7,000. The decline that followed was not random selling. It unfolded in five distinct waves to the downside, completing what the model calls a "Wave A." Think of Wave A as the first leg of a larger correction. It is the move where the market transitions from a bullish trend into a pullback. That wave appears complete.

What typically follows Wave A is a "Wave B," a relief rally. This is where the market bounces, sometimes sharply, before the final leg of the correction. Wave B rallies can be deceptive. They feel like the bottom is in. They attract buyers. But they are part of the correction, not the end of it.

After Wave B finishes, the model expects a "Wave C," a final push lower that often catches people off guard because they thought the worst was over.

The full sequence: decline (A), bounce (B), decline again (C). That is the corrective pattern the MCO Elliott Wave Model is tracking right now.

Where Tuesday's rally fits

Tuesday's 2.9% surge fits directly into this framework as a Wave B bounce. The market was oversold heading into the session. Support near 6,340 had held. A relief rally from that level was expected. The Iran headlines provided the catalyst, but the structure was already set up for a bounce.

This is an important distinction. The news did not cause the rally in a structural sense. The market was primed to bounce. The news gave it a reason to do it quickly and aggressively. If the Iran headlines had not appeared, the bounce would likely have developed more slowly, but it still would have come.

The resistance zone for this Wave B bounce sits between 6,569 and 6,848. The S&P closed at 6,528, just below that window. If the index pushes into that range and stalls, it confirms the move as corrective.

What matters now

The next few days will tell us a lot. The model is watching for a small pullback within this rally. If the market dips and holds a higher low, that suggests the bounce has more room, potentially into the first two weeks of April. This would be the Wave B bounce playing out in a healthy way: up, small dip, up again.

Support to watch: the 6,340 area. A small gap formed there, and it is the level that needs to hold.

Resistance: 6,569 to 6,848. A push into this zone does not mean strength. It means the corrective bounce is maturing and approaching its limits.

If the rally fails and price breaks below 6,340 without forming that higher low, the picture shifts. The next major support sits between 6,072 and 5,814. That is the target zone for Wave C, the final leg of the correction. It would represent another 7 to 11% decline from current levels.

Can the market just go to new highs instead?

It can. That scenario cannot be ruled out. But the MCO Elliott Wave Model treats it as the alternative, not the base case. For new highs to become the primary expectation, the market would need to break above several trend lines that remain intact, sustain momentum above key levels on the RSI indicator across multiple timeframes, and show impulsive rather than corrective price action. None of that has happened yet.

One rally day on a geopolitical headline is not enough. As long as the structure remains corrective, counter-trend rallies should be treated as exactly that.

The bottom line

The S&P 500 bounced hard on Iran peace hopes, and the move fits within the corrective structure the MCO Elliott Wave Model has been tracking since January. The first leg down is done. A relief rally is underway. But the pattern suggests one more leg lower before this correction is complete. The resistance zone between 6,569 and 6,848 is where this bounce gets tested. What happens there will determine whether the correction continues or something larger is developing.