June 5, 2026

The parabolic AI and semiconductor-led rally may have peaked over the short-term this week, retreating from all-time highs as a stronger-than-expected jobs report raised expectations for a more hawkish monetary policy stance. The week began with Iran calling off talks with the US over Israel's attacks on Lebanon, triggering a 6% spike in oil prices. However, investors bought the dip after reports surfaced that Nvidia (NVDA) was expanding its chips into Windows PCs, helping propel stocks to fresh record highs. Stocks were mixed on Tuesday, however, amid concerns that the Strait of Hormuz would remain closed during negotiations, pushing oil prices higher again. Semiconductor stocks continued to rally led by Marvel Technologies (MRVL) after Nvidia's CEO suggested the chip maker could become the next trillion-dollar company. A flare-up in tensions between the US and Iran on Wednesday threatened the fragile ceasefire and sent crude oil prices back towards the $100-a-barrel level. As a result, investors headed for the exits, with the DJIA suffering its largest one-day decline since late March.

A rotation into value-oriented sectors continued on Thursday, as investors shifted capital into Financial and Health Care stocks while the NASDAQ was weighed down by Broadcom's (AVGO) disappointing earnings report. On Friday, a stronger-than-expected nonfarm payrolls report showed that payrolls increased by 172K in May vs. 88K forecasted by economists. The unemployment rate held steady at 4.3%, effectively taking near-term rate cuts off the table. According to the CME Fed Watch Tool, the probability of at least one 25-basis-point rate hike before year-end surged to 71%.

For the period, the DJIA was lower by 695.15 points (-1.35%) and settled at 50866.78. The S&P 500 fell by 200.57 points (-2.64%) and closed at 7383.74. The NASDAQ collapsed by 1121.53 points (-4.18%), finishing at 25709.43. The small cap Russell 2000 plunged by 101.83 points (-3.5%) and settled at 2833.50.

Market Outlook: The technical condition of the market deteriorated this week as the major averages pulled back from their all-time highs amid weakening momentum. The technical indicators have shifted towards a more neutral to negative configuration. MACD—a short-term trend gauge—has crossed into bearish ground for all the major indexes. Momentum, as measured by the 14-day RSI, has also weakened across the major averages, slipping into a neutral reading. Stochastics have retreated from the low 90's for the major indexes, suggesting that the market is beginning to work off its overbought conditions. Areas of concern begin with key secondary indexes, including the Philadelphia Semiconductor Index (SOX), DJ Transportation Index and small cap Russell 2000 which have recently begun to underperform the broader market, which could signal the onset of a broader corrective phase. Volatility remained relatively subdued until Friday, when the VIX, surged back above 21; an area associated with elevated risk levels. As noted in recent weeks, uneven market breadth, negative sector divergences and overbought conditions warranted close monitoring, as the technology-led rally had become susceptible to a pullback.

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 Negative at -5, down two notches from the previous week. Cycles A and B are bullish, while Cycles C, D and E are bearish. The negative CTI configuration is projected to remain in place into the summer months.

Momentum Index (MI): The markets 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 Negative at -6, down six notches from the previous week. Breadth was mixed to negative at the NYSE as the Advance/Decline line was lower by 1174 units while the number of new 52-week highs exceeded the number of new lows on three out of five sessions. Breadth was also mixed at the NASDAQ as the A/D line was fell by 1076 units while the number of new highs out did the new lows on four out of five sessions. Finally, the percentage of stocks above their 50-day moving average decreased to 58.8% vs. 59.5% the previous week, while those above their 200-day moving average rose to 57.6% vs. 56.0% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth is neutral to negative with the NYSE Advance/Decline Line, a leading indicator of market direction, continuing to trend lower during the period. While new 52-week highs continued to outnumber the new lows, the number of new highs tapered off on the NYSE as the week progressed, while new lows expanded into the 70-range by week's end. The number of new highs on the NASDAQ also declined during the week, while new lows increased in the tech heavy index, further indicating a deterioration in market breadth.

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 -1, unchanged from the previous week.

Investor sentiment remains mixed this week with retail bulls edging up from last week while the professionals pulled back from overly bullish levels. The American Association of Individual Investors (AAII) saw almost no change in retail bulls with an increase 0.7 percentage points to 36.3% from the prior week. That reading remains below their historical average of 37.5% for a third straight week. The National Association of Active Investment Managers (NAAIM) Exposure Index however, saw money managers decrease their equity exposure by 11.6% from last week, landing at 86.8%. Finally, while the Percentage of Bullish Investment Advisors increased to 50.9%, up 5.6% from last week while advisors looking for a correction eased back below the 30% level.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bearish as of the week ending 05/15/2026 (DJIA - 50,579.70). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.

Industry Group Rankings: What's Hot (7) - What's Not (23): The following are the strongest and weakest Industry Groups for the period ending 6/04/26. Strongest: Technology Hardware, Conglomerates, Industrial Goods and Healthcare Services. Weakest: Paper & Forest Products, Agriculture, Infrastructure and Consumer Goods. 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 6/04/26 were: Sector- Energy (+3.81%), Specialty Technology (+3.38%), Commodity-Energy (+2.70%), Sector- Internet (+1.92%) and Specialty Financial (+1.78%). The weakest categories were: Commodity-Agriculture (-3.16%), Sector-Telecom (-2.62%), Specialty Communications (-2.62%), Sector- Consumer Staples (-2.52%) and Specialty Retail (-2.40%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.