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MarketsAI Desk•1 views

Iran War Sell-Off Persists Despite Rebound, Chart Analysts Warn

Chart analysts warn that the U.S. stock market sell-off, fueled by U.S.-Iran war tensions, persists despite a Tuesday rebound attempt. High volatility, with the VIX index spiking above 30, underscores ongoing investor fear. Historical patterns show that weekly market rallies often fade later in the week, and pressure on key sectors like semiconductors indicates potential further declines. Experts stress that the market remains biased downward until the conflict resolves or a significant sell-off event occurs, and the final bottom has not been reached.

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Iran War Sell-Off Persists Despite Rebound, Chart Analysts Warn

Despite a Tuesday rebound in U.S. stocks, chart analysts caution that the sell-off triggered by U.S.-Iran war tensions is far from over, citing high volatility and historical patterns that suggest further declines.

Market Rebound and Geopolitical Context

U.S. equities attempted to recover on Tuesday following losses exacerbated by the U.S.-Iran conflict. A report indicated that President Donald Trump is open to ending U.S. involvement in the Middle East war, even if the Strait of Hormuz remains closed. However, analysts argue that this is insufficient to reverse the bearish trend.

Analyst Warnings on Downside Bias

Wolfe Research strategist Chris Senyek highlighted that markets are biased to the downside unless the conflict ends and the Strait of Hormuz reopens, or a major sell-off event marks a bottom. He noted that while investors may be edging toward capitulation, with the VIX spiking above 30, stocks are likely to "slowly grind lower" due to headline risks.

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Volatility Indicators

  • The Cboe Volatility Index (VIX) surged to 31.52 on Monday and traded around 28 on Tuesday, reflecting heightened investor anxiety.
  • A VIX above 30 typically indicates increased fear and potential market stress.

Historical Market Patterns

BTIG chief market technician Jonathan Krinsky pointed out recurring patterns:

  • Rallies often start the week but fade by Thursday or Friday.
  • For the past six weeks, Thursday and Friday have been down days, while Monday has been positive in nine of the last ten weeks.
  • This pattern suggests that the current rebound may be temporary.

Sector Pressure and Correction Signals

  • Semiconductors, which have led market gains in recent years, are now under pressure.
  • Krinsky noted that this sector weakness is a typical sign in market corrections, but it doesn't mean the sell-off is over.
  • "The bad news is there is usually another leg lower when everything gets sold at the same time, and that creates the final bottom," Krinsky wrote. "We don't think we are there yet."
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