The month ahead (May) – Risk-on appetite resurfaces, Nasdaq 100, China A50, AUD/USD signal uptrend continuation

• Risk-on sentiment driving markets: Despite unresolved US–Iran tensions and elevated oil prices, investors have shifted focus to strong corporate earnings, lifting global equities, led by the Nasdaq 100 (+11%).
• Earnings strength underpins bullish outlook: S&P 500 earnings have significantly exceeded expectations, with 84% of companies beating estimates and aggregate surprises at 20.7%, reinforcing optimism and upward revisions in earnings forecasts.
• Equity indices remain in bullish structures: The Nasdaq 100 is overbought but lacks exhaustion signals, while the FTSE China A50 maintains its medium-term uptrend, both suggesting continued upside potential unless key supports break.
• FX market aligned with risk appetite: AUD/USD is strengthening alongside global equities, with rising correlation indicating further upside if risk-on sentiment persists, supported by bullish technical momentum.

Risk appetite has significantly improved in the past five weeks since the end of March, as traders looked past geopolitical risks arising from the yet to be resolved US-Iran conflict, and elevated oil prices staying above $90 per barrel due to the closure of the Strait of Hormuz, choosing instead to focus purely on the robust corporate profit outlooks for 2026.

Taking reference from the pre-war baseline of 27 February 2026 to 1 May 2026, all four US benchmark stock indices have recovered towards positive gains, led by the tech-heavy Nasdaq 100 (+11%), together with several key Asia Pacific stock indices; Taiwan’s TWII (+9.9%), China’s FTSE A50 (+7%), and South Korea’s KOSPI (+5.7%) (see Fig. 1).

Based on the latest report from FactSet¹ published on 1 May 2026, the S&P 500 reported impressive first-quarter earnings results. Overall, 63% of S&P 500 companies have reported Q1 2026 results to date, with 84% delivering EPS above estimates, well above the 5-year average of 78% and the 10-year average of 76%.

If sustained, this would mark the highest beat rate since Q2 2021 (87%). In aggregate, earnings are exceeding forecasts by 20.7%, significantly above the 5-year (7.3%) and 10-year (7.1%) averages, and on track for the strongest upside surprise since Q1 2021 (22.2%).

Also, the US Citigroup Earnings Revision Index has increased significantly to 0.24 as of 24 April 2026, its highest level since 5 December 2025, from -0.16 printed on 3 April 2026 (see Fig. 2).

These observations suggest that sell-side analysts, on average, are optimistic about the outlook for US corporate earnings, in turn, supporting the ongoing bullish trends seen in the US stock indices since the end of March 2026.

For May, we will feature two stock indices and a major FX pair that may continue to benefit from an improving risk appetite scenario.

The US Nasdaq 100 CFD index (a proxy of the Nasdaq 100 E-mini futures) has staged a magnificent rally of 22% from its 31 March 2026 low of 22,813.

This current strong bullish impulsive up move has led the daily RSI momentum indicator of the US Nasdaq 100 CFD index to hover at its overbought zone (above the 70 level) since 15 April 2026.

In the last medium-term corrective decline of 13% seen from the 30 October 2025 high to the 31 March 2026 low, the daily RSI flashed out a prior bearish divergence condition on 29 October 2025 before the correction materialized.

Currently, the daily RSI has not flashed out any clear bearish divergence condition (lower highs on the RSI versus higher highs on the US Nasdaq 100 CFD index), which suggests that the medium-term uptrend remains intact.

Watch the 26,980 key medium-term pivotal support on the US Nasdaq 100 CFD index. A clearance above 27,994 sees the next medium-term resistances coming in at 28,508, and 28,986/29,360 (Fibonacci extension cluster) (see Fig. 3).

On the other hand, a break with a daily close below 26,980 invalidates the bullish tone for a corrective decline to expose the next medium-term supports at 26,288, 25,900, and 25,430.

The China A50 CFD index (a proxy of the FTSE China A50 futures) has managed to stage a bullish reversal on 9 March 2026 after a retest on its medium-term ascending trendline from the 7 April 2026 low.

A positive follow-through was seen on 8 April 2026 as its price actions traded back above its 20-day, 50-day, and 200-day moving averages.

Key medium-term pivotal support rests at 15,375/15,230 to maintain its medium-term uptrend phase. A clearance above 15,740 sees the next medium-term resistances coming in at 16,100 and 16,340 (also a Fibonacci extension) (see Fig. 4).

However, a break and a daily close below 15,230 negates the bullish tone for a potential corrective decline to retest the next medium-term supports at 14,950 (also the 50-day and 200-day moving averages) and 14,735.

Since mid-March 2026, AUD/USD has exhibited a close positive alignment with global equities. The 20-day rolling correlation with the iShares MSCI All Country World Index (ACWI) ETF has surged to 0.92, up sharply from 0.62 on 30 March 2026 (see Fig. 5).

Hence, if the risk-on sentiment continues to persist, a positive feedback loop may be triggered back into the AUD/USD.

The price actions of the AUD/USD have traded back above its 20-day and 50-day moving averages since 8 April 2026, which increased the probability that it is evolving into a potential medium-term bullish impulsive up move sequence.

In addition, the daily MACD trend indicator has continued to trend upwards above its centreline, supporting a potential medium-term uptrend phase in place since the 30 March 2026 low.

Watch the 0.6985 key medium-term pivotal support, and a clearance above 0.7265 sees the next medium-term resistances coming in at 0.7460 and 0.7620 (also a Fibonacci extension) (see Fig. 6).

On the flip side, failure to hold at 0.6985 and a daily close below it jeopardizes the bullish scenario for a potential slide to expose the next medium-term supports at 0.6833/6760 and 0.6675/6650.

Footnotes:

¹ https://insight.factset.com/sp-500-earnings-season-update-may-1-2026