October 31, 2025

The major averages opened the period hitting new record highs for a second straight week as investors positioned for earnings from the Mag 7 stocks, an expected rate cut at the FOMC Meeting and trade deals between the US and several Asian countries, including China. Once again, the gains were led by semiconductors, big cap tech and AI-related stocks. Spikes in chip makers Nvidia (NVDA) and Qualcomm (QCOM) sent the Philadelphia Semiconductor Index (SOX) sharply higher as Qualcomm announced new AI chips to rival Nvidia, while Nvidia surged after announcing new deals with Palantir (PLTR) and a $1 billion investment in Nokia (NOK). The Philadelphia Semiconductor Index jumped +3.6%. A 0.25-point rate cut on Wednesday briefly rallied equities to new highs, but Fed Chair Powell doused the flames with hawkish comments that another rate cut in December was not a foregone conclusion, in fact, far from it. The different indexes retreated from their highs as the CME Group FedWatch trimmed expectations for a rate cut in December to 72.8% from 91.7% a week earlier. Yields ticked higher with the rate on the 10-year Treasury climbing to 4.097%, above where it was in September before the Federal Reserve began cutting rates. Stocks tumbled on Thursday on mixed earnings from Alphabet (GOOGL), Microsoft (MSFT) and Meta Platforms (META), but Amazon (AMZN) rescued the bulls on Friday after posting blowout earnings that sent the stock up +9.58% and the major averages close to record highs. The major averages were able to finish higher for a second straight week led by strength in the Technology (XLK) and Consumer Discretionary (XLY) sectors with the tech heavy NASDAQ turning in one of its best weeks since August. Defensive sectors lagged the broader market with REITs (XLRE), Materials (XLB), Consumer Staples (XLP), and Utilities (XLU) the weakest market groups. The stock market closed on a high note, but the rally was on the backs of a narrow group of stocks on deteriorating underlying breadth. With a government shutdown entering its second month and a lack of key economic data being published, further upside could be limited leaving the stock market to consolidate October's gains as it rolls into November.

For the period, the DJIA gained 355.75 points (+0.8%) and settled at 47562.87. The S&P 500 picked up 48.51 points (+0.7%) and closed at 6840.20. The NASDAQ added 520.09 points (+2.2%) finishing at 23,724.96, while the small cap Russell 2000 fell 34.09 points (-1.4%) and settled at 2479.38.

Market Outlook: The technical condition of the market is currently mixed. Despite record highs this week, as mentioned, the gains were from a narrowing group of overweighted big cap tech and AI-related stocks. Confirming the narrow rally is a chart that shows only 46% of stocks covered by Market Edge trading above their 50-day MA, down from 57% a week ago, and only 41% of stocks in the S&P 500 trade above their 50-day MA. The equal-weight S&P 500 traded down and broke support at its 50-day Moving average (MA) during the week. The technical indicators are still holding a positive bias for the major averages and the SOX, but they slipped into a neutral to negative position for the small cap Russell 2000. In addition, the DJ Transportation Index remains in a trading range that has held since July. While negative divergence in itself is not a reason to sell, investors need to be aware that they increase risks to the downside and suggest a cautious approach to equities is in order. November is historically a positive month for the market but after five-six consecutive monthly gains we could be due for choppy trading as the new month gets underway. Support for the DJIA is at 45,500-45,600 and 6550-6600 for the S&P 500. The NASDAQ has support at 22,200-22,400.

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 -6, unchanged from the previous week. Cycles A and D are bullish, while Cycles B, C 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 Neutral at -2, unchanged from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line lost 1930 units while the number of new 52-week highs exceeded the number of new lows on four of the five sessions. Breadth was also mixed at the NASDAQ as the A/D line dropped 1997 units while the number of new highs out did the new lows on four days. Finally, the percentage of stocks above their 50-day moving average dropped to 46.0% vs. 57.0% the previous week, while those above their 200-day moving average fell to 63.7% vs 67.8% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish. 

Underlying market breadth deteriorated this week with the NYSE and NASDAQ Advance/Declines lower showing more stocks are under distribution than under accumulation. New 52-week highs outnumbered the new highs on the NYSE and NASDAQ but are contracting meaning a smaller group of stocks are leading the market higher.

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 -5 down a notch from the previous week. 

Investor sentiment is bullish, but the bulls are getting close to exuberant levels. The latest survey from the American Association of Individual Investors (AAII) survey saw retail bulls jump to 44.0%, their highest number since the first week of July, while retail bears fell to their lowest number since the first week of July. The National Association of Active Investment Managers (NAAIM) Exposure Index shows the professionals are fully invested and went on margin for the first time since July 2024. Finally, the Percentage of Bullish Investment Advisors jumped to a bearish 57.7%, but bearish advisors dropped to 13.1%, the fewest since March 2024. These Sentiment Indicators become contrarian signals when they reach extreme levels, and the lack of bearish investors is another red flag for equities going forward.  

Market Posture: Based on the status of the Market Edge, market timing models, the Market Posture is Bearish as of the week ending 10/24/2025 (DJIA ñ 47207.12). 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 10/30/25. Strongest: Technology Hardware, Metals & Mining, Healthcare Products and Industrial Goods. Weakest: Paper & Forest Products, Food, Beverage & Tobacco, Building Materials and Hospitality. 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 10/30/25 were: Specialty Technology (+3.82%), Sector-Alternative Energy (+1.44%), Growth-Large Cap (+1.25%), Shorts (+1.08%) and Commodity-Base Metals (+0.88%). The weakest categories were: Sector-Consumer Staples (-3.74%), Specialty Real Estate (-2.71%), Specialty Retail (-2.67%), Commodity-Agriculture (-2.49%) and Consumer Discretionary (-2.27%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT