February 20, 2026

The major averages bounced back from the prior week's drubbing to finish the period with modest gains. The different indexes traded in a narrow range for most of the week with investors stepping in to buy the dips. That was enough for the NASDAQ to snap a five-week losing streak and for the DJIA and S&P 500 to close higher after trading lower over the previous two weeks. After a flat start to the period, the major averages nudged higher as investors picked up some mega cap technology stocks, while reviewing the FOMC Meeting minutes which were slightly more hawkish than expected. Yields were little changed following the report. Stocks stumbled on Thursday as tensions between the US and Iran escalated sending crude oil prices higher. A warmer than expected December PCE, the Fed's preferred inflation gauge, on Friday initially saw yields tick higher but a Supreme Court ruling against Trump's tariffs brought rates down and rallied equities late, led by transportation and tariff-exposed companies. The market sectors closed the period with seven of 11 posting positive with Communication Services (XLC), Industrial (XLI), Financial (XLF) and Consumer Discretionary (XLY) outperforming, while Consumer Staples (XLP), Materials (XLB) and Healthcare (XLV) were the weak links. The short week saw buyers step in on Friday, but concerns over US actions on Iran over the coming weekend may have limited upside. Next week Q1 earnings will wind down during a relatively light week for economic data as February comes to a close. However, investors will be anxious to see earnings from Nvidia (NVDA) after the close on Wednesday for signs the tech trade can resume leadership. One key question mark is how the bond market will react to the tariff decision which will influence the equity market.

For the period, the DJIA added 125.04 points (+0.3%) and settled at 49625.97. The S&P 500 tacked on 73.34 points (+1.1%) and closed at 6909.51 The NASDAQ gained 339.40 points (+1.5%) finishing at 22,886.07. The small cap Russell 2000 picked up 17.08 points (+0.6%) and settled at 2663.78.

Market Outlook: The technical condition improved as the week was ending despite the different indexes trading in a narrow range. Despite modest gains in the major averages the technical indicators remain in neutral to bearish ground with offsetting bullish and bearish signals keeping the indexes range bound and not looking like we'll see a move much higher over the near-term. Momentum, as measured by the 14-day RSI, is stuck in neutral with a small uptick as the period ended. The S&P 500 has moved between 40 and 60 since December as the rotation into cyclical areas has taken hold. The rotation into more cyclical sectors of the market has benefited the Equal-Weight S&P 500, which hit a new record high on Friday, and the DJIA, which is holding above key MA support levels. The S&P 500 was able to close back above its 50-day MA after struggling below that resistance level for most of February. The S&P 500 was also to test and hold support at its 100-day MA during the period. The NASDAQ dropped below its 50 and 100-day MA as February began and is still trading below those key levels and is in a bearish pattern of lower highs and lower lows going back to mid-January. The tech heavy index looks heavy and will need to see renewed buying in big tech stocks in order to break that pattern. The secondary indexes, which include the DJ Transportation Index, small cap Russell 2000 and Philadelphia Semiconductor Index continue to outperform which is a plus for the market going forward. Market technicians prefer to see these indexes lead the market higher and lower and all three closed just below their all-time highs. While the VIX remains elevated, it did move lower as the week progressed meaning traders are still not ready to call a market top.

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 -4, down a notch from the previous week. Cycles A, C and D are bullish, while Cycles B and E are bearish. The CTI is projected to remain in a negative configuration through March.

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 Positive at +4, up four notches from the previous week. Breadth was positive at the NYSE as the Advance/Decline line gained 914 units while the number of new 52-week highs exceeded the number of new lows on each session. Breadth was also positive at the NASDAQ as the A/D line added 982 units while the number of new highs out did the new lows on two of the four days. Finally, the percentage of stocks above their 50-day moving average rose to 62.4% vs. 58.7% the previous week, while those above their 200-day moving average increased to 67.9% vs. 66.4% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth was positive during the period with the NYSE Advance/Decline Line, a leading indicator of market direction, closing at another new high on Friday. That confirms that stocks are under accumulation with investors continuing to buy the dips. New 52-week highs narrowed on both the NYSE and NASDAQ as the major averages closed in a narrow range, but the NYSE continues to post more new highs. The NASDAQ saw new lows outnumber the new highs by a small margin.

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, unchanged from the previous week.

Investor sentiment is bullish, but several surveys showed diminishing bulls. The American Association of Individual Investors (AAII), saw a dip in retail bulls for a third consecutive week falling to 34.5% from 49.5% five weeks ago. That's the lowest percentage of bulls since the last week of November. The National Association of Active Investment Managers (NAAIM) Exposure Index saw little movement posting 82.9%, while the Percentage of Bullish Investment Advisors eased to a neutral 54.7%, down from 62.3% two weeks ago.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Neutral as of the week ending 02/13/2026 (DJIA - 49500.93). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.

Industry Group Rankings: What's Hot (26) - What's Not (4): The following are the strongest and weakest Industry Groups for the period ending 2/19/26. Strongest: Metals & Mining, Chemicals, Transportation and Energy. Weakest: Technology Services, Financial Services, Insurance and Media. 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 2/19/26 were: Sector-Energy (+2.00%), Commodity-Energy (+1.76%), Sector-Industrial (+1.67%), Bond-Government Long Term (+1.63%) and Shorts (+1.13%). The weakest categories were: Commodity-Precious Metals (-2.96%), Sector-Internet (-2.95%), Commodity-Base Metals (-2.57%), Specialty Technology (-2.11%) and Specialty Financial (-1.77%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT