August 21, 2026

A surge in yields and higher oil prices proved too much for the bulls to extend the market rally this week with long bonds hitting their highest levels in nearly two decades. Oil prices opened the period higher as the temporary ceasefire between the US and Iran expired and crude flirted with $90 a barrel after the White House imposed new sanctions on Iran adding to inflation concerns. The 10-year Treasury rate closed the week at 4.735% while the 30-year T-Bill landed at 5.274%, after hitting a 19-year high. The major averages snapped a three-day losing streak on Wednesday after the Treasury Department announced it would double the size of its buyback program temporarily sending yields lower. Another tick higher in yields on Thursday sent the different indexes sharply lower again before getting some relief on Friday. Q2 earnings were mixed with several big-box retailers reporting. While Home Depot (HD), Target (TGT) and Ross Stores (ROST) beat estimates, Walmart (WMT) and Lowe's (LOW) disappointed with Walmart issuing cautious guidance on the consumer. The results came on the heels of a -0.6% slide in July Retail Sales worrying investors about the resilience of consumer spending. AI-related spending was also a concern this week with the Philadelphia Semiconductor Index (SOX) dropping -5.4% before finding support at its 100-day MA. The Healthcare (XLV) sector outperformed on strength in Merck (MRK) and Moderna (MRNA) following positive results from a late-stage melanoma trial. Moderna's stock soared +176% before trimming gains later in the week with Merck soaring +12%. Crypto currencies came off the mat with Bitcoin jumping +23% during the period triggered by the Treasury's move to buyback bonds at the long end of the yield curve. Crypto traders Coinbase (COIN) and RobinHood (HOOD) were also sharply higher. Energy (XLE) and Materials (XLB) also outperformed but eight of 11 sectors finished lower with Technology (XLK), Industrial (XLI) and Utilities (XLU) at the bottom of the ledger. A weakening US Dollar gave a boost to commodities with the DB Commodity Index (DBC) up more than 4% for the period and has jumped +10.4% since the start of August. The major averages bounced on Friday ahead of the weekend, but it wasn't enough to pull the different indexes out of the red and the S&P 500, NASDAQ and Russell 2000 snapped their three-week win streak. The DJIA was down for a second straight week and its steepest weekly decline since mid-July. Next week, earnings season will wind down with chipmaker Nvidia (NVDA) reporting on Wednesday, while the major averages try to hold on to their August gains as the month wraps up.

For the period, the DJIA lost 455.40 points (-0.8%) and settled at 53277.01. The S&P 500 dropped 111.39 points (-1.4%) and closed at 7674.37. The NASDAQ tumbled 548.71 points (-2.1%), finishing at 26180.45. The small cap Russell 2000 fell 50.55 point (-1.6%) and settled at 3017.87.

Market Outlook: The technical condition of the market deteriorated slightly this week as the different indexes consolidated some of the gains from their recent breakout but remained close to all-time highs. MACD, a short-term trend gauge, was negative for the major averages and Momentum, as measured by the 14-day RSI, has slipped into neutral ground and is slowing across the board. Thursday's pullback saw the DJIA, NASDAQ and Russell 2000 flirt with their respective 50-day MA, before Friday's bounce. The NASDAQ 100 dipped below its 50-day MA after a five-day selloff before closing back above that level as the week ended. The Philadelphia Semiconductor Index (SOX) rally stalled at its 50-day MA again but pulled back and found support at its 100-day MA. Like the NASDAQ 100, traders will keep a close eye on those key MA levels for signs we could see more selling.  At this stage, however, this week's pullback looks more like a consolidation move back to support rather than the start of an extended slide as investors mostly seem to be shaking off higher yields.

Several of the ETF market sectors also flirted with key MAs this week. Only the Industrial (XLI) sector failed to hold support at its 50-day MA despite better-than-expected manufacturing data this week. Energy (XLE), Healthcare (XLV) and Materials (XLB) hit new highs and Financial (XLF) is only a week removed from its own new high. Communication Services (XLC) and Utilities (XLU) are weak with the former battling lawsuits over social media that could weigh on the market group going forward.

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 +9, unchanged from the previous week. Cycles A, B, C, D are Bullish, while Cycle E is Bearish. The CTI is projected to remain in a positive configuration into October.

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, down six notches from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 1383 units while the number of new 52-week lows exceeded the number of new highs on four of the five sessions. Breadth was mixed at the NASDAQ as the A/D line fell 1484 units while the number of new highs out did the new lows on three days. Finally, the percentage of stocks above their 50-day moving average fell to 54.8% vs. 64.0% the previous week, while those above their 200-day moving average eased to 59.9% vs. 61.8% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth lost a little ground this week with the NYSE and NASDAQ Advance/Decline lines both lower. In addition, new lows on the different exchanges were close to the number of new highs and expanded.

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, up a notch from the previous week.

Investors are still bullish. There was a small uptick in the retail bulls to 35.5% from 34.7%, but they remain below their historical average of 37.5% for a seventh time in the last eight weeks. The National Association of Active Investment Managers (NAAIM) Exposure Index shows little movement by investment managers easing to 94.5% from 95.5% the prior week. A VIX holding below 16 also shows that traders aren't overly concerned that we'll see a significant pullback over the near-term.

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 (90) - What's Not (82): The following are the strongest and weakest Industry Segments for the period ending 8/20/26. Strongest: Movie Theaters, Other Business Services, Full-Service Restaurants and Silver. Weakest: Pulp & Paper Products, Other Infrastructure, Parcel Delivery and Aluminum. 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 8/20/26 were: Commodity-Energy (+6.43%), Commodity-Precious Metals (+4.51%), Commodity-Blend (+4.43%), Sector-Energy (+4.04%) and Specialty Health (+3.58%). The weakest categories were: Specialty Technology (-5.81%), Sector-Alternative Energy (-4.85%), Sector-Industrial (-3.80%), Specialty Financial (-3.59%) and Sector-Internet (-3.30%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT