August 7, 2026

The major averages were able to add to the prior week's gains to start the week after President Trump called off more attacks on Iran. Oil prices and yields nudged lower, and investors piled back into AI-related, big-cap technology stocks and the Mag 7. Stocks surged again on Tuesday after Treasury Secretary Bessent said a deal to open the Strait of Hormuz could come within the next day. The major averages were sharply higher for a fourth consecutive session, with the S&P 500, NYSE and small-cap Russell 2000 joining the DJIA at new record highs. The Philadelphia Semiconductor Index (SOX) soared +6.55%, with the Technology (XLK) sector jumping +4.98%. The rally paused for the NASDAQ midweek as earnings from Advanced Micro Devices (AMD) and a drop in Alphabet (GOOGL) after a shakeup in its AI leadership sent the NASDAQ lower but left the broader market mixed. Disappointing earnings or guidance weighed on equities on Thursday, and investors fretted over a deal between Oman and Iran to open the Strait of Hormuz that would ban the US and Israel. Stocks got an opening bounce on Friday after the July BLS jobs report showed payrolls declined by -23k vs. +83k expected. Wage increases were also light M/M and Y/Y. The weak jobs report pulled yields lower as it gave the Federal Reserve more wiggle room to hold rates steady at the next FOMC Meeting. Eight of 11 sectors traded higher during the period, leaving the different indexes with solid gains for the week. Technology (XLK) was the strongest market group, surging +7.20%, while Materials (XLB), Consumer Discretionary (XLY), Industrial (XLI) and Communication Services (XLC) were also sharply higher. Energy (XLE) and Utilities (XLU) were the weak links. The major averages rolled into the weekend on a two-week win streak, with new highs hit during the period for the DJIA, S&P 500, Equal-Weight S&P 500, NYSE and Russell 2000. Next, investors will peruse another round of Q2 earnings and get another check on inflation in the CPI and PPI.

For the period, the DJIA gained 1551.90 points (+3.0%) and settled at 54036.93. The S&P 500 added 267.92 points (+3.6%) and closed at 7757.64. The NASDAQ jumped 1316.77 points (+5.2%), finishing at 26690.62. The small-cap Russell 2000 picked up 103.15 points (+3.5%) and settled at 3034.49.

Market Outlook: The technical condition of the market improved this week as weeks of sideways trading in the S&P 500 resolved themselves to the upside. Several indexes hit new all-time highs, while the NASDAQ and NASDAQ 100 retraced more than 61.8% of their June-July tumble and crossed above falling trend lines. The major averages are also now above key MA resistance levels, which bodes well for the market going forward. The technical indicators for the different indexes are now in bullish territory, with a bullish cross in the MACD, a short-term trend gauge, and upward Momentum, as measured by the 14-day RSI, strong. The S&P 500 and Philadelphia Semiconductor Index also had Point & Figure 2x Top Breakout chart patterns, a bullish signal. The S&P 500 and NASDAQ finished the period slightly overbought, with stochastics in the low 80s, hinting that we could see some consolidation over the short term. Although August is seasonally a weak period for the market, the Market Edge Cyclical Trend Index (CTI) reset four of the five cycles followed in the market timing model, changing the Market Posture to Bullish and projecting a bullish CTI into October.

The market sectors show a broadening out as nine of 11 market groups now trade above their respective 50/100- and 200-day MAs. Financial (XLF), Industrial (XLI), Healthcare (XLV) and REITs (XLRE) hit new highs, while Materials (XLB) and Consumer Discretionary (XLY) are mere points away. Only Utilities (XLU) and Communication Services (XLC) are lagging, but Communication Services jumped almost 6% from last week's low, recovering from a selloff stemming from Meta Platforms (META) and Alphabet (GOOGL)'s recent struggles.

The market sectors finished the period mixed, with Financial (XLF), Healthcare (XLV) and REITs (XLRE) making new highs. Consumer Discretionary (XLY) outperformed, jumping +6.11% on strength in Amazon (AMZN), while Communication Services (XLC), Financial (XLF) and Consumer Staples (XLP) were also strong. Utilities (XLU), REITs (XLRE), Materials (XLB) and Industrial (XLI) were the weakest sectors. Pointing to a broadening out of the market, six sectors trade above their 50/100- and 200-day MAs, and only three are below their 50-day MA but are showing improving momentum, another plus going forward.

A chart of these indicators can be found by going to the Market Edge Home page and clicking on Market Recap, which is on the right-hand side of the page just below the Second Opinion Status numbers.

Cyclical Trend Index (CTI): The underlying premise of the CTI is that the market, as measured by the Dow Jones Industrial Average (DJIA), tends to move in cycles that often resemble sine waves. There are five identifiable cycles, each with different time durations at work in the market at all times.

Currently, the CTI is Positive at +9, up 24 notches from the previous week. Cycles A, B, C and D are Bullish, while Cycle E is Bearish. The CTI is projected to remain in a positive configuration into October.

Momentum Index (MI): The market's momentum is measured by comparing the strength or weakness of several broad market indexes to the DJIA. Readings of -4 and lower are regarded as bearish since it is an indication that a majority of the broader-based market indexes are weaker than the DJIA on a percentage basis. Conversely, readings of +4 or higher are regarded as bullish.

The Momentum Index is Neutral at +0, up eight notches from the previous week. Breadth was positive at the NYSE as the Advance/Decline line added 1784 units, while the number of new 52-week highs exceeded the number of new lows on all five sessions. Breadth was also positive at the NASDAQ as the A/D line gained 5150 units, while the number of new highs outdid the new lows on each day. Finally, the percentage of stocks above their 50-day moving average jumped to 56.8% vs. 49.1% the previous week, while those above their 200-day moving average rose to 59.8% vs. 57.2% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth also improved as the NYSE Advance/Decline Line, a leading indicator of market direction, hit a record high this week. The number of new 52-week highs on the NASDAQ outnumbered the new lows and hit 341 on Tuesday, up from only 93 the prior Friday. The NYSE new highs also are beating the new lows.

Sentiment Index (SI): Measuring the market's Bullish or Bearish sentiment is important when attempting to determine the market's future direction. Market Edge tracks thirteen technical indicators listed below that measure excessive bullish or bearish sentiment conditions prevalent in the market. The Sentiment Index is Negative at -4, down two notches from the previous week.

Last week's breakout rallied the bulls as investors jumped back on the bullish bandwagon. The National Association of Active Investment Managers (NAAIM) Exposure Index saw a spike in equities, while the Percentage of Bullish Investment Advisors jumped to 53.7%, up from 49.1% the previous week. The American Association of Individual Investors (AAII) survey showed an increase in retail bulls, soaring to 37.0%, up from 29.6% two weeks ago, but still a tick below the historical average of 37.5% for the fifth time in the last six weeks. Finally, the Percentage of Bearish Investment Advisors dropped to 14.8%, its lowest percentage since the first week of June.

Market Posture: Based on the status of the Market Edge market timing models, the 'Market Posture' is Bullish as of the week ending 08/07/2026 (DJIA - 54,036.93). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.

Industry Segment Rankings: What's Hot (100) - What's Not (72): The following are the strongest and weakest Industry Segments for the period ending 8/06/26. Strongest: Movie Theaters, Home Furnishings & Fixtures Stores, Generic Pharmaceuticals and Other Construction. Weakest: Special Purpose Acquisition Companies, Other Infrastructure, Renewable Energy and Computers & Servers. To review all the Industry Group rankings in the Market Edge universe, click on the Industry Group tab.

ETF Center: The top-performing ETF categories for the week ending 8/06/26 were: Specialty Technology (+6.87%), Specialty Communications (+4.81%), Sector-Telecom (+4.81%), Sector-Basic Materials (+4.72%) and Growth-Large Cap (+4.23%). The weakest categories were: Commodity-Energy (-5.64%), Shorts (-2.95%), Commodity-Blend (-1.32%), Sector-Consumer Staples (-1.22%) and Sector-Energy (-1.21%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT