The Correction Was a Bear Trap. Now Comes the Fed.

The selloff is over almost as fast as it started. The S&P 500 bottomed at 7,237 on Tuesday of last week, then turned and ran. By Friday it had closed at 7,431, and this morning it gapped higher again toward 7,550. In four sessions the market erased the entire correction that took two weeks to build.

The reason arrived over the weekend. The United States and Iran announced a framework to end the war. The Strait of Hormuz is reopening and the naval blockade is being lifted. Oil, which had been the market's biggest fear, slumped toward $80. Stocks soared around the world. The S&P 500 jumped about 1.5% to start the week.

The story this week is no longer whether the correction is real. It resolved. The story is whether the rebound has enough left to clear the summer target, or whether it needs one more pullback first. The answer runs through one resistance zone and one Fed meeting. The Federal Reserve decides Wednesday, and it is the new chair's first time at the table.

Last Issue's Calls, Resolved

Last week we named 7,330 as the line that keeps the summer advance alive, and 7,250 as the next support if it broke. Both got tested. The market did close below 7,330 on Wednesday, briefly tripping the warning. But the low that followed was 7,237 — right on the 7,250 support zone we flagged. The break below 7,330 was a bear trap, not the start of a deeper slide. Price snapped back above the line within a day and never looked back.

The bigger call was the one that mattered. We wrote that the correction would bottom in the late-June window and that the low "is the buying opportunity before the summer's final push higher." The low came early and the reversal was violent. Anyone who treated the 7,237 area as support rather than a reason to panic caught the turn. The summer thesis is intact and now has price momentum behind it. The 7,330 floor break was the one rough edge, and it lasted exactly one session.

The Fear That Drove the Selloff Just Disappeared

For two weeks the market had one real worry, and it was oil. The Iran conflict kept crude elevated, and high oil is an inflation problem. An inflation problem is a Federal Reserve problem. That chain of logic is what pulled the S&P 500 down from its 7,620 high and what pushed rate-hike bets to their highest level of the year.

The weekend framework broke that chain. With the Strait of Hormuz reopening, crude fell back toward $80 and the inflation scare eased with it. Treasury yields dropped. Bets on a Federal Reserve rate hike receded sharply. The single biggest weight on stocks was lifted in a matter of hours. Markets in Asia led the response, with Japan and South Korea both jumping more than 5%, and the move carried straight into US futures.

The deeper support under this market never went away. Commercial traders — the most informed participants — stayed heavily net long through the entire pullback. They were positioned for exactly this kind of snapback. Now the macro fear that was fighting them has faded, and the path of least resistance has flipped back to the upside. The question is no longer direction. It is how much room is left before the next pause.

The Numbers That Decide This Week

The S&P 500 starts the week near 7,550 after reclaiming everything it lost in the correction. The level that matters now sits just overhead. The zone from 7,583 to 7,621 is the gate. That band marks the prior high and the lower edge of the summer target. How the market handles it decides the next move.

Clear 7,621 on a closing basis and the path opens to 7,760 first, then the summer target zone of 7,750 to 8,000. Stall and reject at that band, and the more likely outcome is a pullback toward 7,250 before the rally resumes. That second path is not bearish — it is one more discount before the same destination. Either way, the summer target is the objective. The only question is whether the market runs straight at it or pauses to catch its breath first.

On the downside, the levels stack up clearly. The first support is the 7,431 area, last week's close and former resistance. Below that is 7,330, the old reversal line that is now a floor. The line that actually matters is 7,237 — last week's low. As long as 7,237 holds on a closing basis, the correction is finished and the rebound is intact. A close back below it would reopen the downside and put the March low of 6,317 back in view as the structural floor. That is a distant level, but it is the one that anchors the whole advance.

What to Watch This Week

The price setup is already pointing higher. The correction low held, the rebound is sharp, and the biggest macro fear just lifted. Geopolitics is doing what it usually does — supplying the narrative for a move that price had already set up. The Iran framework is the permission slip the market wanted to follow through on the bounce.

The two things that could change the tone are both about follow-through. Watch oil first. If crude keeps sliding toward $80 and below, the inflation story stays buried and stocks keep their tailwind. A surprise re-escalation that sends oil back up would do the opposite. For gold, the peace deal cuts the other way — the safe-haven bid that had supported it is fading, yet it is holding its rebound near $4,380 on its own footing. For the dollar, receding rate-hike bets are a mild headwind, which has kept the euro firm near 1.16.

Warsh's First Fed Meeting Is the Main Event

The Federal Reserve meets Tuesday and Wednesday, June 16 and 17, and delivers its decision Wednesday afternoon. This is Kevin Warsh's first meeting as chair. No rate change is expected. What matters is the tone, the press conference, and the fresh dot plot that shows where officials see rates heading. With the oil scare gone, the pressure to sound hawkish has eased considerably. Markets have already pushed the first fully-priced rate hike out to early 2027.

The week is busy around the Fed. Monday brings the Empire State manufacturing read and industrial production. Tuesday adds May housing starts alongside the start of the Fed meeting. Wednesday pairs the rate decision with May retail sales, a direct look at whether the consumer is still spending. The setup favors the bulls. A patient, balanced Fed lets the rebound run straight at 7,621 and beyond. The only real risk is a hawkish surprise — a dot plot that still signals hikes despite the lower oil picture. That would be the trigger for the one-more-dip scenario, sending the market back toward 7,250 before it tries the summer target again.

Two Scenarios for the Week Ahead

Oil stays low, the Fed sounds patient, and the momentum from the Iran deal carries through. The S&P 500 pushes through the 7,583 to 7,621 gate on a closing basis. That opens a direct run at 7,760, then the summer target zone of 7,750 to 8,000. In this path, the correction low at 7,237 was the last good entry of the season, and the market drives toward its peak in the late-July to mid-August window without a meaningful pause. The bear trap was the bottom, and the summer rally is already underway.

The market stalls at the 7,583 to 7,621 band and gets rejected, or a hawkish Fed dot plot spooks it. Price pulls back toward 7,250, holding above the 7,237 reversal low. This is a pause, not a reversal — a final discount before the same summer target. That pullback, if it comes, is the last buying opportunity before the run to 8,000. The destination does not change. The market simply takes the scenic route and offers one more entry along the way.

Both scenarios share the same autumn outlook. A significant decline from the summer peak — expected in the September to October window — remains the next major event on the longer-term map. That decline is projected to be sharp. The low that forms in the autumn is shaping up as one of the most important buying opportunities of the year. Everything this summer is a setup for what comes in the fall.

What It All Comes Down To

The correction is over. It bottomed at 7,237, the break below 7,330 proved a trap, and an Iran peace deal lit the fuse for the rebound. The market enters the week with momentum and one major test ahead.

The level to watch is 7,621. Clear it and the summer target of 7,750 to 8,000 opens directly. Stall at it and the more likely outcome is a dip toward 7,250 first — which would be the last entry before the same rally. The line that protects the whole setup is 7,237. As long as that holds on a closing basis, the rebound is intact.

The event to watch is the Fed on Wednesday. With oil down and the inflation scare fading, a patient tone from the new chair is the path of least resistance — and the fuel for a run at the summer high. A hawkish surprise is the only thing standing between the market and a clean breakout. The bottom is in. The only question left is the route to the top.