US-IRAN WAR: Stock Market Crash coming?

Key points 📌

• Fundamental undervaluation: Data from the Forecaster Rankings shows that despite recent geopolitical tensions, the S&P 500 remains fundamentally undervalued, with the top 10 positions and the technology sector showing even deeper discounts.

• Strong institutional buying: The COT report reveals that long-term asset managers are not panicking; instead, they are actively increasing their long positions and buying the dip, signaling deep institutional confidence.

• Bullish historical patterns: Both the Forecaster Seasonality and Projection tools point to a highly positive outlook for the coming months, with a high historical correlation suggesting recent market drops are buying opportunities rather than the beginning of a crash.

Recent geopolitical developments, specifically the sudden outbreak of conflict between the United States and Iran, have dominated global headlines and introduced a new layer of uncertainty for investors. In moments like these, it is natural to question whether the overarching bullish outlook on the S&P 500 has fundamentally shifted, or if a massive, systemic crash is looming in the coming days. To navigate this volatility effectively, relying on objective data rather than emotional reactions is essential. By utilizing the comprehensive analytical suite within the Forecaster terminal, it is possible to break down the current market landscape step by step and see exactly what the numbers are indicating.

Evaluating index valuation with Forecaster Rankings

The first step in this objective analysis involves the Forecaster Rankings tool. This specific section of the software provides organized data across all indexes, sectors, and industries. When focusing specifically on the S&P 500, the platform reveals a highly insightful perspective on whether the broader index is currently under or overvalued.

The Forecaster terminal calculates the exact fair value for every single individual company and stock within the index. By averaging the fair values of all 500 components, the resulting data shows that the S&P 500 is currently 12.3% undervalued. This fundamental analysis metric is crucial to keep in mind, especially considering the index is hovering near all-time highs.

Interestingly, diving deeper into the components reveals even stronger data. If the focus is narrowed strictly to the top 10 positions within the S&P 500, the undervaluation stays high at 8.79%. This divergence from the broader index average is a relatively new phenomenon compared to the past few years. Furthermore, by isolating the technology sector—which comprises 85 companies within the index—using the filtering functions in Forecaster, the undervaluation skyrockets to over 17.35%. This highlights that despite recent high-profile pullbacks in prominent tech stocks, the fundamental baseline remains remarkably solid.

Tracking institutional sentiment via the Forecaster COT report

Shifting the perspective from fundamental valuation to market positioning, the Forecaster COT report (Commitment of Traders) offers vital clues. When analyzing the COT report, the primary focus should be on the “Asset Managers” category. This group includes institutional investors, pension funds, insurance companies, and mutual funds—entities that operate with a long-term investment horizon, unlike non-commercials or leverage funds that act as short-term speculators.

The customizable charting features within Forecaster allow users to overlay COT data directly onto price charts. Looking at the current data, a very clear trend emerges: even with prices near all-time highs and during recent minor downward movements, asset managers are actively increasing their long positions. As prices have dipped in recent weeks, institutional buying has accelerated.

This behavior strongly suggests that these major players recognize the fundamental undervaluation of the market. Historically, as seen on the Forecaster charts for late 2024 and 2022, asset managers began offloading their long positions up to six months before major market drops occurred. Currently, the exact opposite is happening. The smart money is absorbing the selling pressure, reinforcing the idea that long-term investors are not panicking over the geopolitical news.

Identifying historical trends with the Forecaster Seasonality page

To understand how the market typically behaves during this time of year, the Forecaster Seasonality page provides indispensable context. According to the data tables generated by the software, the market is entering a traditionally robust period that runs from April through August. Whether looking at a 10-year, 15-year, or 20-year average, this specific window has historically proven to be heavily bullish.

The software also features a specialized correlation tool that identifies which specific past years most closely mirror current price action. Currently, the market is tracking very closely with the behavior seen in 2020, boasting a correlation of over 70% with both that specific year and the broader 30-year historical average. Based on these historical projections mapped out on the Forecaster charts, the market possesses a strong bullish potential of +5% to +10% over the next two and a half months, indicating that the seasonal risk of a severe drop remains extremely low.

Validating patterns through the Forecaster Projection tool

Beyond seasonality, the Forecaster Projection tool approaches market forecasting through advanced pattern recognition. The software analyzes the exact price action of the past three months and scans the entire historical chart of the S&P 500 to find identical or highly similar formations.

In the current scenario, the software has identified 6 historical cases where the market moved exactly as it has over the last 90 days. Out of those 6 instances, 5 resulted in a positive outcome, meaning prices continued to rise following the pattern. The historical event with the highest correlation dates back to 1994. The current projection generated by Forecaster carries a high probability of success (over 70%) and a maximum robustness rating of five out of five stars. Ultimately, both the seasonality metrics and the pattern projection tools—two entirely different analytical approaches—point toward the exact same bullish outlook.

Analyzing momentum and divergences on the Forecaster charts

Finally, it is necessary to evaluate market momentum using the overbought and oversold indicators, alongside the long and short divergence signals directly integrated into the Forecaster charting interface.

Recently, the software identified a standard setup for a bearish divergence. The indicator successfully reached an overbought state, crossed the zero line, and established a higher high compared to the previous peak, perfectly aligning with an overbought reading on the advanced DPO (Detrended Price Oscillator). However, despite this strong technical setup for a downward correction, the market powered straight upward. The anticipated short signal resulted in a “misfire,” and the market mood meter indicator subsequently dropped to a reading of -50.

Currently, the market is not heavily oversold, but the failure of a highly probable short setup to materialize demonstrates overwhelming underlying strength. When viewing the market through these multiple lenses provided by the software, there is simply no data supporting a long-term, structural crash. Instead, sudden downward movements—such as the recent dip triggered by the geopolitical tensions between the United States and Iran—appear to be localized reactions and strategic buying opportunities.

For those looking to conduct this level of professional analysis themselves, the software utilized throughout this breakdown is the Forecaster terminal, and a link to try the platform for free is available below.