Some of the most anticipated earnings announcements of the season are suddenly saving the bull market from disaster.

An ugly GDP print looked ready to sink stocks earlier this week. But investors refused to step aside.

Buyers stood their ground and supported a snapback move heading into Thursday’s close — just ahead of the first big earnings releases of the quarter.

We’ll never know for certain what drove the averages off their morning lows. But I’m betting the blockbuster earnings reports had something to do with it…

Microsoft Inc. (MSFT) reported “record revenue growth and strong demand” thanks to the cloud and AI.

Meanwhile, Meta Platforms Inc. (META) boasted $42 billion in revenue, estimating that more than 3 billion people use at least one of their platforms.

Even the less-than-perfect reports aren’t eliciting major negative reactions on Wall Street.

Apple Inc. (AAPL) has been the biggest mega-cap drop so far, slipping 3% after missing estimates and remarking that tariffs would likely add $900 million in costs this quarter.

Meanwhile, Amazon.com Inc. (AMZN) dropped just a little more than 1% after citing tariffs as a reason for issuing lower-than-expected guidance.

It might feel like a routine earnings week for the market. But this isn’t your run-of-the-mill earnings season.

Remember, the S&P 500 and Nasdaq Composite are both stuck in a volatile range. With the averages in no-man’s land, investors are hanging on every word of these earnings calls, searching for any excuse to buy with both hands… or sell everything.

Last week, we discussed how SPY was coming up against resistance at 550, while the Qs had to break through the wall at 470 if they had any chance of extending higher. Both have retaken these respective levels.

No, we’re not completely out of the woods just yet. But these positive earnings reactions are constructive.

As the S&P closes out its third positive week of the past four, we need to start giving the bulls the benefit of the doubt.

Let’s go to the charts!

The Ghost of 2020

While it likely won’t play out exactly the same, it’s time to seriously consider the recovery off the lows playing out much like the move off the COVID lows of 2020.

In fact, the COVID crash and the tariff correction are quite similar. Even the setups leading into the declines mirrored each other. In both cases, the averages were overbought and the herd was looking for a reason to take profits.

Then, a big news event sent the public into a frenzy (spiking COVID cases and lockdowns vs. aggressive tariff negotiations).

The markets cratered, and investors experienced sharp declines lasting several weeks, followed by a recovery taking the averages back to the scene of the crime – the area where the breakdown initially accelerated.

Here’s a look at the 2020 and 2025 drops in the S&P 500 on one chart:

It’s important to note that the 2020 COVID crash was much steeper than this year’s tariff correction. But the similarities are striking.

Five years ago, SPY snapped back to 300 and consolidated, then managed to push to new highs by late June.

This time around, SPY has snapped back to a similar area of resistance, this time near 550. Note how this level is also where the initial drop from the highs bounced, then failed during the correction. 

Can its next move rhyme with what we witnessed in 2020?

If we do roughly follow the COVID recovery, we would see new highs before the end of the third quarter.

Tariffs Take a Back Seat

Once the COVID shock wore off and the Fed stepped in, stocks were off to the races. The market discounted the news, then recovered.

Like COVID, I don’t think the tariff story is going to magically disappear anytime soon. It will likely continue to evolve in the weeks and months ahead, resurfacing whenever progress or setbacks emerge. But the initial shock of the news has worn off.

In order for tariffs to continue to move markets, we’re going to need to see additional developments. Because right now, it’s starting to look like the market is moving on. We’re just not seeing huge price moves accompanying every single bit of tariff speculation hitting the wire.

Meanwhile, sentiment remains incredibly bearish. According to the new AAII sentiment survey, bearish responses held above 50% for a record tenth straight week, while bullish responses also remain historically low.

While sentiment responses aren’t a trading signal, they are an important condition to watch as the market defies the odds and pushes higher.

Remember, most investors were not expecting bullish earnings reactions.

They continue to watch for negative tariff news to lead to ugly market surprises. And their bearish responses keep setting records.

Is this enough to ignite a more powerful recovery off the lows? It’s possible!

Stocks have plenty of work left to do. But you should keep an open mind and continue to seek out bullish opportunities in this market.

If we do see a COVID-like recovery, the upside will likely surprise most investors heading into the summer.