September 18, 2026

A volatile week left the major averages mixed as investors struggled with rising rates, higher oil prices and a hawkish Fed outlook to curb inflation. Stocks dropped at the opening bell to start the week on AI-related concerns before investors bought the dip bringing the different indexes off their lows in the afternoon. The yield on the 10-year Treasury briefly crossed above 5% as market participants looked ahead to the Fed's Wednesday decision on interest rates. Equities were mostly lower again on Tuesday as oil prices surged on Middle East supply concerns. The yield on the 10-year T-Bill hit a 19-year high as it closed above 5% on inflation concerns. Only two sectors closed in the plus column with Energy (XLE) hitting a new record high. The major averages were lower for a sixth time over the last seven sessions. The Federal Reserve raised rates a 0.25-point on Wednesday as expected, bumping the Fed funds rate to 3.75-4.0% in a unanimous decision. Hawkish comments from new Fed Chair Kevin Warsh however, sent equities down as Warsh hinted that additional rate hikes were likely to regain the Fed's 2% inflation target. While the DJIA closed with a 631.21-point (-1.21%) loss the NASDAQ battled back almost to the flat line as investors rotated into the safety of large cap tech shares and the Mag 7 leaving the NASDAQ with only a 3.15-point loss. The major averages bounced back on Thursday as traders gave a thumbs up to the Fed's move interpreting Warsh's comments as the Committee being serious about containing inflation. Stocks rallied at the open led by a spike in the Technology (XLK) sector as big cap tech and the Mag 7 did the heavy lifting for a second day. The Consumer Discretionary (XLY) and Utilities (XLU) market groups also outperformed. The major averages traded mixed on Friday as the different indexes struggled with buying in big tech and the Mag 7 with nine of 11 sectors finishing in the red. The Magnificent 7 ETF (MAGS) hit a new record high on Friday for the first time since May. As the period wrapped up, the DJIA was red for a third consecutive week and down for a fifth week over the last six. The S&P 500 was lower for a second straight week, while the NASDAQ was up for a third time over the last four weeks. Next, it's a light week for economic data and earnings as investors hope to escape the ominous month of September with limited damage while keeping a close eye on yields and oil prices.

For the period, the DJIA lost 890.65 points (-1.7%) and settled at 51682.64. The S&P 500 eased 6.48 points (-0.1%) and closed at 7650.55. The NASDAQ gained 189.51 points (+0.7%), finishing at 26522.55. The small cap Russell 2000 lost 43.54 points (-1.5%) and settled at 2860.40.

Market Outlook: The technical condition of the market is mixed as the DJIA dropped below its 100-day MA and printed an intraday low of 51,186.67, its lowest level since June as it continues to post lower highs and lower lows. The S&P 500, NASDAQ and NASDAQ 100 struggled to hold support at their respective 100-day MA before closing back above their 100 and 50-day MA on Thursday's bounce. The technical indicators for the Dow Jones and the Equal-Weight S&P 500 (RSP) are in negative ground this week but both indexes closed the period oversold with stochastics below 20. The technical indicators for the S&P 500, NASDAQ and NASDAQ 100 are mostly in neutral ground with Momentum, as measured by the 14-day RSI, holding in the 50 range as the indexes remain range bound. The secondary indexes, which include the DJ Transportation Index and Russell 2000 underperformed which is a negative for the broader market going forward, but the Philadelphia Semiconductor Index (SOX) managed to nudge into positive territory as the period closed. All three of the secondary indexes are below key MA support levels with the DJ Transportation Index dipping below its 200-day MA on Friday for the first time since October 2025. The small cap Russell 2000, which is more sensitive to higher rates, fell back to its June level and is now down more than -6% from its August record high.

The market sector map continues to point to a narrowing group of stocks with only two of the 11 sectors higher on the week. Healthcare (XLV) outperformed on strength in biotech, while Technology (XLK) eked out a gain on a rotation back into big cap tech stocks and the Mag 7. As mentioned, the Magnificent 7 ETF (MAGS) hit a record high on Friday. Utilities (XLU), Financial (XLF), Industrial (XLI) and Materials (XLB) were the weakest sectors. Seven of the sector ETFs are trading below their 50/100 and 200- MA which shows deterioration in the broader market. While Energy (XLE) made a new high during the week, Healthcare (XLV) and Technology (XLK) are the only other market groups above their respective key MA levels. Financial (XLF) displayed weakness and slipped below its 50-day MA as a narrowing yield curve weighed on banks with Goldman Sachs (GS) and Bank of America (BAC) down almost -8%. Finally, the Market Edge Industry Segment rankings have fallen to 53 Strong or Improving from 104 the week ending 8/11/2026, while Weak or Deteriorating ratings dropped to 119 from only 68 showing broadening weakness in the market.

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 Positive at +7, unchanged from the previous week. Cycles B, C, D are Bullish, while Cycles A and E are Bearish. The CTI is projected to remain in a positive configuration into October although adjustments are probable in extending some of the earlier bearish cycles.

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 +0, up two notches from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 2093 units while the number of new 52-week lows exceeded the number of new highs on all four sessions. Breadth was also negative at the NASDAQ as the A/D line fell 2502 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 increased to 35.6% vs. 35.4% the previous week, while those above their 200-day moving average fell to 50.0% vs. 51.8% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth was negative for a fifth consecutive week with the NYSE and NASDAQ Advance/Decline lines again lower. The NYSE A/D line fell back to a level from early June, while the NASDAQ A/D line pulled back to its March numbers. New lows on the NYSE and NASDAQ expanded and outnumbered the new highs by a wide margin for a third consecutive week.

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 -2, up a notch from the previous week.

Both retail and professional investors reined in their bullish outlook this week with the Association of Individual Investors (AAII) reporting a -9.2-percentage drop in retail Bulls to 28.8%. That is the fewest bulls in a year dating back to 9/11/2025. Retail Bears also spiked coming in at 53.3%, a 14-percentage point jump, and the most bears since the week ending 5/01/2025. The National Association of Active Investment Managers (NAAIM) Exposure Index saw the professionals' cut to 71.9% from 89.6% the prior period, the least equity exposure since the week ending 4/10/2026. These sentiment indicators become contrarian indicators when they reach extreme levels and suggest that we could be approaching a level where another drop in the different indexes could see market participants buy the dip.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bullish as of the week ending 08/07/2026 (DJIA - 54,036.93). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.

Industry Segment Rankings: What's Hot (53) - What's Not (119): Of the 172 Industry Segments that we track, 53 are rated as either Strong or Improving while 119 are regarded as Weak or Deteriorating. The Previous Week's totals were 64-108. The following are the strongest and weakest Industry Segments for the period ending 9/17/26. Strongest: Movie Theaters, Silver, Oil & Gas Refining Marketing and Gold. Weakest: Other Transportation, Parcel Delivery, Pulp & Paper Products and Other Infrastructure. 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 9/17/26 were: Specialty Health (+2.13%), Sector-Internet (+1.52%), Commodity-Base Metals (+1.45%), Specialty Communications (+1.21%) and Sector-Telecom (+1.21%). The weakest categories were: Commodity-Agriculture (-3.05%), Specialty Financial (-2.75%), Sector-Energy (-2.23%), Specialty Natural Resources (-1.42%) and Specialty Real Estate (-1.17%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT