October 30, 2026

The major averages tried to find firmer footing under October's slide this week but a steep selloff in technology stocks left the S&P 500 and NASDAQ at their lows for the month. The period saw the major averages post modest gains to start the week as investors were cautious ahead of the Fed's midweek announcement on rates. Tech stocks got an early boost from Anthropic's (ANT) announced IPO on Tuesday and the NASDAQ and Philadelphia Semiconductor Index (SOX) were on a four-day win streak through Wednesday. A disappointing earnings report from Alphabet (GOOGL) after Wednesday's close however, rattled AI and tech investors. Alphabet dropped -12.80% on Thursday and software and semiconductors sold off in sympathy. More bad news was in store for tech stocks on Friday after Intel (INTC) and Amazon (AMZN) missed numbers triggering another sharp selloff in the major averages to end the week.

The Federal Reserve left interest rates unchanged on Wednesday, as expected, citing the need to accumulate more information to determine policy. Fed Chair Kevin Warsh commented in his press conference that while the economy was expanding at a strong pace, inflation remained elevated, leaving the door open for a December rate hike. There was little reaction from equities, while the yield on the 10-year treasury slipped back below 5% on increased demand landing at 4.93%. Oil prices were little changed for most of the week on hopes for a diplomatic solution between the US and Iran, but prices spiked again on Friday after new attacks on tankers in the Strait of Hormuz and new threats from the Houthis on oil supplies. Crude oil closed the period at $103.07 a barrel.

Outside of earnings from the mega-cap technology companies, Q3 earnings were solid but guidance was mixed. Royal Caribbean (RCL), Carvana (CVNA), Crocs (CROX), Eli Lilly (LLY), Merck (MRK), Chevron (CVX) and Exxon Mobil (XOM) traded higher, but Fortinet (FTNT), CH Robinson (CHRW), Caterpillar (CAT) and Boeing (BA) were punished for missing estimates.

Next up, end of the month job and manufacturing numbers will cross the tape and Q3 earnings will begin to taper off. Going into November, the Russell 2000 was on a three-week win streak, while the S&P 500 and NASDAQ were lower for a third consecutive week. The DJIA snapped a two week win streak.

For the period, the DJIA lost 444.85 points (-0.9%) and settled at 51770.31. The S&P 500 fell 43.61 points (-0.6%) and closed at 7580.07. The NASDAQ dropped 518.34 points (-2.0%), finishing at 25437.00. The small cap Russell 2000 added 35.94 points (+1.3%) and settled at 2811.84.

Market Outlook: The technical condition of the market deteriorated this week as a selloff in big cap technology stocks weighed on the broader market. The technical indicators weakened with MACD, a short-term trend gauge, in bearish ground and Momentum, as measured by the 14-day RSI, negative for the S&P 500 and NASDAQ. The major averages lost support at key moving average (MA) levels during the week after bouncing off those levels over the last few weeks. The major averages finished the period below their respective 50 and 100-day MA which is a negative over the intermediate term. The VIX, or volatility index, hit a high of 23.93 during Friday's wreck which is not a level that shows panic selling, yet. That hints that we could see more weakness over the short-term as investors fret over the worst drop in the NASDAQ since a 1121.53-point tumble on June 5. Usually, a selloff of this magnitude will see the VIX spike above 25-30 before signaling that the selling is getting overdone, and traders begin to wade back into the water. Also, according to FINRA, September Margin debt was close to a record high again which could lead to margin calls to start the week inducing more selling in technology stocks.  In addition, the S&P 500 and NASDAQ are in a bearish chart pattern of lower highs and lower lows since the beginning of October. Showing positive divergence however was the Equal-Weight S&P 500 which remains in an uptrend and trades above key MA support levels. This resilience suggests that despite weakness in technology stocks, investors are rotating funds into defensive positions. Lastly, two of the secondary indexes, which include the DJ Transportation Index and small cap Russell 2000, also showed positive divergence finishing the week in the plus column, while the NASDAQ Biotechnology ETF (IBB) closed the week at a new record high. The Market Edge Market Posture, Bearish since 10/23/2026 remains Bearish and investors may want to remain defensive at this time.

The sector map shows a rotation into defensive and cyclical market groups for a second straight week with nine of the 11 sector ETFs closing higher for the week. The move away from mega-cap technology and semiconductor stocks helped defensive and cyclical market groups outperform with Healthcare (XLV), Utilities (XLU), Materials (XLB), Industrial (XLI) and Consumer Discretionary (XLY) outperforming, up more than +2%. In addition, Energy (XLE), Consumer Staples (XLP) and Healthcare (XLV) hit new highs during the period. Six of the 11 market groups are still trading above their respective 50/100 and 200-day MA, which is also a positive for the broader market. Only two sectors, Communication Services (XLC) and Industrial (XLI) are below their 50/100 and 200-day MA with XLC hitting a 17-month low. Technology (XLK) and Utilities (XLU) are still trading above their 200-day MA, but Technology entered into correction territory on Friday, down -11.1%.

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 -2, down a notch from the previous week. Cycles C, D are Bullish, while Cycles A, B and E are Bearish. The CTI is projected to remain in a negative configuration through November.

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 -4, up two notches from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line gained 762 units while the number of new 52-week lows exceeded the number of new highs on all five sessions. Breadth was also mixed at the NASDAQ as the A/D line added 264 units while the number of new lows out did the new highs on each day. Finally, the percentage of stocks above their 50-day moving average jumped to 44.3% vs. 34.7% the previous week, while those above their 200-day moving average rose to 44.3% vs. 42.5% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth was mixed for the broader market. The NYSE and NASDAQ Advance/ Decline lines, which are considered leading indicators of market direction, ticked higher for a second consecutive week which helps to confirm a broadening out of the trade and a rotation into more defensive sectors. While new 52-week lows continue to dominate the new highs, there was marginal contraction in the new lows for a second straight week, which is a positive.

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 -3, down three notches from the previous week.

While excess bullishness has been reined in recently, market bears remain hard to find. The National Association of Active Investment Managers (NAAIM) Exposure Index fell to 76.8% from 86.7% the prior week, which is a shade below their Q3 average of 86.9%. The Percentage of Bullish Advisors fell for a fourth consecutive week landing at a neutral 45.4%.  Retail bulls remain close to their historical level of 37.5% coming in at 37.8% according to the American Association of Individual Investors (AAII). The rub is that the Percentage of Bearish Investment Advisors is steady at only 16.4%. The last time this percentage was above 20% was mid-June.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bearish as of the week ending 10/23/2026 (DJIA - 52,214.63). 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 (33) - What's Not (139): Of the 172 Industry Segments that we track, 33 are rated as either Strong or Improving while 139 are regarded as Weak or Deteriorating. The Previous Week's totals were 45-127. The following are the strongest and weakest Industry Segments for the period ending 10/29/26. Strongest: Toys & Games, Security Software & Systems, Medical Equipment Distributors, and Home Healthcare. Weakest: Pulp & Paper Products, Other Transportation, Parcel Delivery and Other Metals & Mining. To review all the Industry Segments rankings in the Market Edge universe, click on the Industry Group tab.

ETF Center: The top performing ETF categories for the week ending 10/29/26 were: Specialty Technology (+5.84%), Sector-Energy (+4.05%), Growth-Small Cap (+3.17%), Blend-Small Cap  (+3.03%) and Sector-Industrial (2.54%). The weakest categories were: Commodity-Blend (-4.86%), Sector-Telecom (-3.23%), Specialty Communications (-3.23%), Sector-Internet (-2.95%) and Shorts (-2.93%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT