January 16, 2026

Intraday volatility from geopolitical turmoil in Iran, a DOJ probe into Fed Chair Jerome Powell and mixed earnings from the Money Center Banks left the major averages little changed but lower this week. Banking shares struggled during the period with the White House making comments to cap credit card rates at 10% for one year rattling card issuers Capital One (COF), Visa (V) and Mastercard (MA) and Q4 earnings from the Money Center Banks failed to inspire investors as JP Morgan (JPM), Wells Fargo (WFC) and Bank of America (BAC) traded sharply lower. Offsetting weakness in the Financial (XLF) sector were surging semiconductors. The Philadelphia Semiconductor Index (SOX) extended its weekly win streak to four as it hit a series of record highs led by Advanced Micro Devices (AMD), Applied Materials (AMAT), Micron Technologies (MU) and Taiwan Semiconductor (TSM) after a blowout quarter that saw earnings and revenues soar 30%. Economic data was better than expected with the November PPI and December CPI showing inflation in line with projections. Thursday's jobs report was better than consensus while manufacturing data also beat estimates. Yields ticked higher on the data with the rate on the 10-year Treasury closing at 4.228%, its highest since September. Crude oil prices swung in a $4 range on Trump's off and on threats to interfere with Iran's uprising before closing the period nearly flat at $59.52 a barrel. The market sectors ended mixed with REITs (XLRE), Consumer Staples (XLP) Industrial (XLI) and Energy (XLE) outperforming, while Communication Services (XLC), Financial (XLY) and Consumer Discretionary (XLY) were the weakest market groups. Despite the DJIA, S&P 500 and NASDAQ closing lower, the secondary indexes, including the small cap Russell 2000, DJ Transportation Index and Philadelphia Semiconductor Index hit all-time highs on a rotation out of big cap software names and the Mag 7. The NYSE and Equal-weight S&P 500 also punched record highs, confirming rotation into more cyclical industry groups. That rotation was also visible in strong underlying breadth with expansion in the number of new 52-week highs and the NYSE Advance/Decline line posting a new high. Next week, we have a full slate of Q4 earnings that will test the health of the market rally, and January PCE, the Fed's preferred inflation gauge before the FOMC Meeting on January 27-28. The NYSE will be closed on Monday.

For the period, the DJIA fell 144.74 points (-0.3%) and settled at 49359.33. The S&P 500 gave up 26.27 points (-0.4%) and closed at 6940.01. The NASDAQ dropped 155.96 points (-0.7%) finishing at 23,515.39. The small cap Russell 2000 jumped 53.52 points (+2.0%) and settled at 2677.74.

Market Outlook: The technical condition of the market remained steady this week with most of the technical indicators in positive ground but MACD, a short-term trend gauge, flat for the S&P 500 and NASDAQ. The stock market should be able to grind higher over the near term, but the major averages are overbought with the Market Edge/S&P Short Range Oscillator (SRO) registering 6.39% on Thursday which historically has led to some consolidation or profit taking. With strong underlying breadth beneath the surface investors will likely continue to buy the dips. If there is a deeper selloff market technicians will keep an eye on the December lows, as a dip below that signals a more significant market shift and a change in the major trend. As mentioned, the secondary indexes which include the DJ Transportation Index, Russell 2000 and Philadelphia Semiconductor Index all outperformed the major averages which bodes well for the market going forward. Market technicians like to see the secondary indexes lead the market higher/lower pointing to more aggressive buying. The VIX, or, Volatility Index, which measures how concerned traders are of possible weakness in the market, saw an uptick this week but remains at a low level of 15.86 reflecting that market participants aren't expecting a selloff in the near-term and has yet to reach a reading of complacency whereas it slips below 12.

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 +5, down a notch from the previous week. Cycles A B, C and D are bullish, while Cycle E is bearish. The CTI is projected to remain in a positive configuration through January.

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, up two notches from the previous week. Breadth was positive at the NYSE as the Advance/Decline line gained 2039 units while the number of new 52-week highs exceeded the number of new lows on all five sessions. Breadth was also positive at the NASDAQ as the A/D line added 1725 units while the number of new highs out did the new lows on each day. Finally, the percentage of stocks above their 50-day moving average jumped to 73.3% vs. 68.0% the previous week, while those above their 200-day moving average increased to 71.6% vs. 66.6% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth was strong during the period with the NYSE Advance/Decline Line, a leading indicator of market direction, posting several new highs. New 52-week highs in the NYSE and NASDAQ expanded during the period with the NASDAQ recording 447 new highs on Tuesday, the most in a single session since late October. The NYSE recorded more new highs than lows for a ninth consecutive week with expanding numbers.

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 -7 down a notch from the previous week.

Investor sentiment remains overly bullish and with the major averages posting new highs as investors chase the rally to new highs. JP Morgan reported that 'retail investors poured $12 billion into equities last week, buying single stocks at the highest level in 9 months'. The American Association of Individual Investors (AAII) showed retail bulls jumped to 49.5%, above the historical average of 37.5%, and the most bullish read since mid-November 2024. The National Association of Active Investment Managers (NAAIM) Exposure Index shows the professionals remain 'all in' at 96.0%, a seventh consecutive week above 90%. That's the longest streak since October 2021!

Market Posture: Based on the status of the Market Edge, market timing models, the Market Posture is Bullish as of the week ending 11/28/2025 (DJIA - 47716.42). 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 (27) - What's Not (3): The following are the strongest and weakest Industry Groups for the period ending 1/15/26. Strongest: Metals & Mining, Paper & Forest Products, Transportation and Chemicals. Weakest: Technology Services, Telecommunications, Conglomerates and Integrated Oil & Gas. 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 1/15/26 were: Commodity-Precious Metals (+6.67%), Sector-Basic Materials (+5.52%), Specialty Natural Resources (+5.12%), Sector-Consumer Staples (+4.47%) and Specialty Real Estate (+3.91%). The weakest categories were: Specialty Financial (-2.54%), Commodity-Agriculture (-1.63%), Sector-Internet (-1.08%), Specialty Health (-0.92%) and Shorts (-0.60%).  To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT