Wednesday’s surge may not be based entirely on fundamentals, according to Piper Sandler. The Dow Jones Industrial Average , S & P 500 and Nasdaq Composite all ripped more than 2% on Wednesday after the U.S. and Iran agreed to a two-week ceasefire. Those gains pushed the indexes back above their 200-day moving averages, key technical levels watched by traders. The rally also left the benchmarks testing their 50-day averages. On paper, these moves seem like positives for a market mired by headline volatility. But Craig Johnson, Piper’s chief market technician, warned that such a move above the 200-day — where the averages had seen resistance since the war began — could trigger a short-squeeze among traders. This phenomenon occurs when investors and traders are forced to quickly cover short positions, giving the underlying security an additional artificial boost. “If buyers can maintain strength above the 200-day MAs, the possibility of a further short-covering squeeze that rallies toward the 50-day MAs may unfold,” Johnson wrote. .SPX mountain 2026-02-27 .SPX since Feb. 27, 2026. That could mean the jump equities are experiencing Wednesday may not be the start of a real rally, but rather investors trying to recalibrate their portfolios. Johnson pointed out that small- and midcap stocks have outperformed amid the war in the Middle East, as they were still trading above their 200-day moving averages. He expected those groups to continue to be relatively strong and advised clients to buy the dip in energy names — which he says still have long-term upside. As for the major averages, Johnson thinks more time is needed to construct a new bull cycle, though that could happen if the markets experience strong breadth over the next few days. For now, though, he believes intermediate risks remain to the downside. “From a sentiment perspective, this appears to be more of just a temporary contrarian bounce than an actual climbing of a wall of worry,” Johnson wrote. .RUT mountain 2026-02-27 .RUT since Feb. 27, 2026
