Introduction

The pressure valve just released.

In our 4/5 report, we outlined why oil was nearing a peak—and that call has now played out. The signals aligned, and price followed. With oil rolling over, a key constraint on the market has been lifted. But as always, removing one problem doesn’t mean the system is clear—it simply shifts the focus to what comes next.

In our prior note, we addressed a common critique—that DeMark signals can’t front-run geopolitical developments. That may be the prevailing view, but our experience suggests otherwise. Time and again, these signals have marked inflection points ahead of the narrative—and this instance was no different.

We wrote:

“The good news for equity bulls: a new DeMark Combo 13 sell signal can print in two days. We can already hear the pushback—DeMark signals can’t predict geopolitical outcomes in the Middle East. Fair. But our counter is simple: over multiple decades, these signals have shown an uncanny ability to mark inflection points, regardless of the narrative driving price.”

Now look at where that Combo 13 sell printed—right at the peak, just ahead of last night’s ceasefire announcement.

We don’t claim to know how or why DeMark signals consistently front-run these developments—they just do. And we don’t overthink it.

Since that signal printed, oil has dropped more than 20%.

And we didn’t mince words. We were as direct as possible:

“…there is a real setup for oil to top in the near term—potentially as soon as this week.”

That’s exactly what happened.

With oil—the primary choke point on global growth—rolling over, equities responded immediately. The SPX surged, gaining ~3% at its highs as that pressure began to unwind.

That’s one spicy meatball—and another example of our work generating outsized alpha for those paying attention.

Just last week, we were calling for a buy-the-dip in equities—and we leaned in, adding to long exposure based on what the signals were telling us.

As it relates to the SPX, we wrote:

“Thursday’s reversal off the newly formed white gap window also points to genuine buyer commitment, particularly given it occurred ahead of a three-day weekend loaded with potential headline risk.”

“On shorter time frames, an inverse head and shoulders reversal pattern is beginning to take shape…”

“With MACD on the verge of a bullish crossover, the setup favors a breakout.”

And on the R2K (RTY):

“We think the probability of a move higher is increasing, with a likely test of the December breakout pivot and the 50-day moving average.”

Now look where we closed on Wednesday—right at, and through, that resistance zone.

We wrote this in our conclusion:

“The setup for higher index prices is clearly in place. Across multiple fronts—technicals, internals, credit, and positioning—we are seeing a market that is attempting to transition from distribution into a more constructive phase. Our call for a reversal last week played out, and we believe continuation is the more likely path from here.”

It’s hard to be more clear than that.

This is a game of probabilities. We’re never operating with certainty—but when the odds begin to stack meaningfully in our favor, we act. That’s exactly why we recommended increasing long exposure.

So where does that leave us now?

For starters, there are some significant gaps left open from Wednesday’s session. How long those remain open will tell us a lot about the strength of this move and serve as a clean gauge of buyer commitment. Strong markets don’t rush to fill gaps—they build on them.

With one of the market’s largest pressure valves now released, attention can begin to shift back toward fundamentals. As we move into earnings season with Q1 in the books, companies will start reporting over the coming weeks—and we suspect the results will be solid.

Importantly, estimates have been trending higher all quarter, while price has lagged behind. With war-related fears beginning to recede, the setup is there for a catch-up move—where valuations reprice higher to reflect improving fundamentals.

As noted in our 4/5 report, we have key inflation data on deck this week—PCE on Thursday and CPI on Friday. While these releases typically carry market-moving weight, we suspect they will be viewed as backward-looking.

With oil now well off its highs, any inflation spikes in the data are likely to be transitory, and the market should largely look through them.

So yes—the primary pressure valve appears to have been released. Does that mean stocks go straight back to all-time highs?

Not so fast.

Oil, while off the peak, is still elevated and likely remains so until there is greater clarity around the ceasefire. The peak is likely in—but unless tensions re-escalate, the path forward for equities should be higher, albeit far from linear.

This sets up a recovery—but one that will likely be choppy, uneven, and highly dependent on incoming headlines.

Let’s check the charts.