November 6, 2026

A blue wave in the midterm elections took the tide of investors sharply higher before a riptide pulled the different indexes sharply lower with AI-related stocks getting washed out. The major averages traded mixed as the week began as investors continued to rotate out of technology shares and into defensive sectors. Oil prices slid lower on renewed hopes for a diplomatic peace settlement between the US and Iran briefly slipping below $90 a barrel. The NASDAQ snapped a three-day losing streak on election day with semiconductors getting a lift from blowout earnings from Advanced Micro Devices (AMD). Investors celebrated the Democrats gaining control of Congress on Wednesday with the different indexes trading sharply higher as traders repositioned into healthcare, housing and alternative energy industries. Strong Q3 earnings from Amgen (AMGN), Booking Holdings (BKNG), McDonalds (MCD) and others also gave stocks a boost. The Dow Jones surged 1569.40-points (+3.03%) and the Equal-Weight S&P 500 hit a new record high with nine of the 11 sectors closing in the green. The party was short-lived however, as a wave of selling on concerns of more restrictions and regulations on companies throttled the AI trade on Thursday. Every market group finished lower as the major averages turned in their worst session since April 2025. Semiconductors led the market down with the Philadelphia Semiconductor Index (SOX) tumbling -12.25%. Data center stocks were also hit hard after negative comments by new Democrat governors in Texas, Ohio and Georgia that already have projects underway. The DJIA erased the prior day's gains dropping 1833.06-points (-3.44%), while the NASDAQ sank -5.52%. Cooler heads prevailed on Friday as investors moved in and scooped up beaten down technology stocks, but it wasn't enough to prevent the NASDAQ and S&P 500 from closing down for a fourth consecutive week. The DJIA was lower for a second straight week. Q3 earnings slowly unwind next with a slow week of economic data that may give investors a chance to catch their breath after one of the most volatile periods this year.

For the period, the DJIA lost 484.58 points (-0.9%) and settled at 51285.73. The S&P 500 lost 203.21 points (-2.7%) and closed at 7376.86. The NASDAQ dropped 857.58 points (-3.4%), finishing at 24579.42. The small cap Russell 2000 slipped 57.73 points (-2.1%) and settled at 2754.11.

Market Outlook: The technical condition of the market deteriorated further this week as the selloff in the S&P 500 and NASDAQ wiped out all the market gains dating back to July. The technical indicators for the indexes are firmly in bearish ground with MACD, a short-term trend gauge, moving lower and Momentum, as measured by the 14-day RSI, negative and slowing. The NASDAQ, NASDAQ 100 and small cap Russell 2000 knifed through their respective 200-day MA and are in a correction, down more than -10%, while the Philadelphia Semiconductor Index (SOX) was already below that support level and in a Bear market, down -38% from its June high. The SOX has erased all its gains going back to April. While the more speculative indexes saw the most selling, there were some positive signs. Although the DJIA and S&P 500 are trading below their respective 50 and 100-day MA, they remain above support at their 200-day MA. The DJIA also remained above its September low. In addition, the Equal-Weight S&P 500 was able to bounce off support on Friday at its 50 and 100-day MA after hitting a new record high on Thursday. Market technicians will also note that the DJIA and S&P 500 have found support after retracing 38.2% of their March -August rally. The NASDAQ selloff slowed at its 50% retracement of the March-October rally. The NASDAQ 100 dipped below that key support level on Thursday, but gapped up on Friday to that 50% retracement ahead of the weekend. If the different indexes are able to hold these technical support levels, we could see investors buy the dip on Monday. However, the spike in the VIX on Thursday suggests we're likely to see more volatility in stocks before we see a sustainable reversal. With the VIX this elevated, investors might want to be on the lookout for a possible selling climax or capitulation in the market. This is when one sees a spike in the VIX during a steep selloff, but traders jump in to buy the drop and often times bring the indexes back up to a gain for the session marking a tradeable bottom. If equities are hit with additional weakness however, a target for the DJIA would be 50675 which represents the September low and 200-day MA. The S&P 500 could see 7300-7320, the July low and 200-day MA, while the NASDAQ, which may have already put in a short-term bottom, a downside target could reach 23,500, a 61.8% retracement of the March- October rally. 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 the rotation into defensive market groups ongoing for a third straight week while leaving the sectors mixed. Surprisingly, five of the 11 sectors managed to post positive during the period with Consumer Discretionary (XLY), Consumer Staples (XLP), Financial (XLF), and Healthcare (XLV) all hitting new record highs. Materials (XLB) and REITs (XLRE) are also trading above their 50/100 and 200-day MA. This week Energy (XLE) was the weakest sector, down -12.0% after hitting a new high last week, while Technology (XLK), down -18% from its recent high, lost -8.23%. The Industrial (XLI) sector also lagged and fell into a correction down -12%. The Communication Services (XLC) sector outperformed this week, up +4.89%, after bouncing off an extreme oversold condition, but trades below its 50/100 and 200-day MA. Market Edge rates Communication Services (XLC), Industrial (XLI) and Technology (XLK) Avoid, while the other sectors have been upgraded to Neutral from Avoid or Long.

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, unchanged 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 -6, down two notches from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 190 units while the number of new 52-week lows exceeded the number of new highs on four of the five sessions. Breadth was also negative at the NASDAQ as the A/D line dropped 644 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 fell to 36.9% vs. 44.3% the previous week, while those above their 200-day moving average dropped to 37.1% vs. 46.5% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth mildly weakened during the period. The NYSE and NASDAQ Advance/ Decline lines, which are considered leading indicators of market direction, finished with modest losses indicating that this week's selloff wasn't a washout. There was improvement in the NYSE with new highs expanding this week and posting more new highs than lows on Wednesday for the first time since August 28. New 52-week lows also contracted, a positive move. It was a different story at the tech heavy NASDAQ as new lows expanded and continue to dominate the new 52-week highs.

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, up two notches from the previous week.

Investor's bullish sentiment took another step back with the American Association of Individual Investors (AAII) showing retail bulls falling back to 34.1%, their lowest percentage since the last week of September. Investment managers were little changed with the National Association of Active Investment Managers (NAAIM) Exposure Index rising to 78.6% from 76.8% the prior week, which is below their Q3 average of 86.9%. The Percentage of Bullish Advisors fell for a fifth consecutive week landing at a neutral 42.6%. That's the lowest percentage of Bullish Advisors going back to mid-April and is close to becoming a contrarian indicator. This week's manipulations are likely to sway these numbers more bearish next week.

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 (71) - What's Not (101): Of the 172 Industry Segments that we track, 71 are rated as either Strong or Improving while 101 are regarded as Weak or Deteriorating. The Previous Week's totals were 33-139. The following are the strongest and weakest Industry Segments for the period ending 11/05/26. Strongest: Other Infrastructure, apparel & Clothing, Home Healthcare and Hospitals. Weakest: Special Purpose Acquisition Companies, Other Metals & Mining, Other Transportation and Parcel Delivery. 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 11/05/26 were: Shorts (+5.61%), Specialty Retail (+3.43%), Sector-Consumer Staples (+3.00%), Sector-Consumer Discretionary (+2.67%) and Commodity-Precious Metals (+1.42%). The weakest categories were: Specialty Technology (-18.63%), Sector-Energy (-12.60%), Commodity-Energy (-10.85%), Sector-Industrial (-9.86%) and Growth-Large Cap (-8.22%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT