July 17, 2026

AI jitters and cap-ex worries slammed big cap technology and Mag 7 stocks this week pulling the major averages lower with the Philadelphia Semiconductor Index (SOX) falling into a Bear market, down -20.2%. Despite the selloff in tech shares, a rotation into defensive and cyclical sectors pushed five of the 11 sectors higher. The week opened on a sour note as renewed fighting between the US and Iran sent oil prices up and global markets lower. Yields jumped to an 18-month high with the rate on the 10-year treasury landing at 4.617% before ending the period at 4.550%. A -9.06% tumble in Korean memory chip-maker SK Hynix (SKHY) weighed on semiconductors and the SOX dropped -4.78% on the day. Surprising inflation data helped the different indexes rebound mid-week as the June CPI fell -0.4% and the June PPI slid -0.3%. Yields inched lower on the reports with the CME Group FedWatch projecting only a 10.2% chance of a July rate hike, down from 41.7% earlier in the week. The Dow Jones eked out a gain despite a -25.37% plunge in International Business Machines (IBM) after pre-releasing weaker-than-expected revenue citing slower growth in its software and infrastructure businesses. It was 'Big Blue's' worst single-session decline since 1987. Record setting earnings from the Money Center Banks pointed to underlying strength in the economy but Goldman Sachs (GS), Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C) closed the week mixed. More selling in semiconductors and overweighted big-cap technology shares on Thursday and Friday kept the different indexes in the red, but a rotation into cyclical sectors limited the selloff. The major averages struggled again going into the weekend as China's Moonshot AI model threatened to compete with US rivals as tech and AI-related shares once again traded sharply lower. The major averages limped into the weekend lower with the DJIA down for a second straight week for the first time since March. Next, investors will mull a full slate of earnings, while keeping a close eye on escalating Middle East tensions and oil prices.

For the period, the DJIA lost 490.59 points (-0.9%) and settled at 52146.42. The S&P 500 fell 117.70 points (-1.6%) and closed at 7457.69. The NASDAQ lost 761.37 points (-2.9%), finishing at 25520.24. The small cap Russell 2000 was also down for a second week slipping 15.59 points (-0.5%) and settled at 2962.22.

Market Outlook: The technical condition of the market is mixed though there was some deterioration this week as the different indexes worked their way sideways and remained range bound. The technical indicators are mixed with most slipping into neutral territory. The MACD, a short-term trend gauge, had a bearish cross for the DJIA, S&P 500 and NASDAQ. Momentum, as measured by the 14-day RSI, is positive for the Dow Jones, neutral for the S&P 500 and negative for the NASDAQ, while slowing across all three indexes. The S&P 500, NASDAQ, NASDAQ 100 and SOX all ended the week trading below their respective 50-day MA which is a negative going forward. The triangle chart pattern that has been in play over the last few weeks for the major averages didn't pan out. Usually, a stock or index will resolve this pattern with a breakout above or below signaling the next leg of a trend, but in this case, as sometimes happens, the different indexes fell into a trading range negating the pattern. Furthermore, the DJIA and S&P 500 held above the prior week's low, a positive, but the NASDAQ fell below last week's low, a negative. As mentioned during the week, the rotation into defensive and cyclical sectors can be seen in underlying breadth, but the selloff in overweighted big cap technology stocks will make it tough for the broader market to make much headway until we see those stocks put in a bottom. One last indicator to throw in the mix is the Market Edge Cyclical Trend Index (CTI) is still forecasting that the market is susceptible to weakness through July as we enter what is historically a weak period in the calendar.

Energy (XLE) was the leading sector for a second straight week jumping +4.72% on rising oil prices, while REITs (XLRE), Financial (XLF) and Consumer Staples (XLP) also outperformed. The Consumer Staples, Healthcare (XLV), Industrial (XLI) and Utilities (XLU) sectors are all trading above key MA levels which is helping to confirm the rotation our of technology and into cyclical and defense. In addition, four sectors have a 50-day RS above 1.0, meaning they are outperforming the S&P 500, while two are just a tick below. The Market Edge Industry Segments list also saw a nice turn around with 96 industries rated Strong or Improving from just 69 the prior week, while there was a drop from 93 to 76 in industries rated Weak or Deteriorating.

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 -15, down two notches from the previous week. Cycles A, B, C, D and E are bearish. The negative CTI configuration is projected to remain in place through July.

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, unchanged from the previous week. Breadth was positive at the NYSE as the Advance/Decline line gained 243 units while the number of new 52-week highs exceeded the number of new lows on each session. Breadth was negative at the NASDAQ as the A/D line lost 6062923 units while the number of new lows out did the new highs on four of the five days. Finally, the percentage of stocks above their 50-day moving average eased to 55.0% vs. 56.2% the previous week, while those above their 200-day moving average increased to 60.2% vs. 59.5% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth was mixed. The NYSE Advance/Decline Line, a leading indicator of market direction, hit new highs during the week, while the NASDAQ A/D Line finished the period lower, not seeing any progress since mid-April. There was also contraction in the number of new 52-week highs in the NASDAQ, but the number of new lows were fairly contained showing the down days have been orderly. The NYSE continues to notch more new highs than lows, but the number of new highs remains anemic with only 78 new highs on Monday, down from 175 two weeks ago.

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.

Investors shook off the skirmishes between the US and Iran as we saw an uptick in bulls across the board. The American Association of Individual Investors (AAII) survey saw a jump to 44.9% in retail bulls, matching the survey results from three weeks ago, and the most bulls since the end of April. The percentage of bears fell for a third consecutive week, falling to 32.9%. The National Association of Active Investment Managers (NAAIM) Exposure Index jumped to 95.6% from 83.0% the prior period as the pros are once again, 'all in'. The Percentage of Bullish Investment Advisors increased to its second highest percentage since February, while the Percentage of Bearish Investment Advisors fell to 16.7%, the fewest bears since mid-March and the biggest spread between the two since February raising a red flag. Finally, according to FINRA, June Margin Accounts hit a new record. High margin balances can exacerbate a selloff as margin calls can induce more selling. This is a sign that traders may be getting too complacent as equities climb a wall of worry.

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 Segment Rankings: What's Hot (96) - What's Not (76): The following are the strongest and weakest Industry Segments for the period ending 7/16/26. Strongest: Sporting Goods, Staffing & Human Resources, Generic Pharmaceuticals and Mobile Devices. Weakest: Special Purpose Acquisition Companies, Confectioners, Gold and Other Metals & Mining. 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 7/16/26 were: Commodity-Energy (+7.77%), Sector-Energy (+3.89%), Specialty Financial (+3.17%), Commodity-Blend (+2.81%) and Specialty Retail (+2.78%). The weakest categories were: Specialty Technology (-7.50%), Sector-Alternative Energy (-4.68%), Commodity-Precious Metals (-4.15%), Growth-Mid Cap (-3.41%) and Growth-Small Cap (-2.49%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT