October 16, 2026

A busy week of big bank earnings and inflation reports left the major averages mostly lower, but the Dow Jones was able to post a small gain. Uneven Q3 reports from Goldman Sachs (GS), JP Morgan Chase (JPM), Citigroup (C) and Morgan Stanley (MS) saw strong earnings but mixed revenues as market participants cut back on trading. Hotter-than-expected inflation reports in the CPI and PPI sent yields higher, then lower as bond traders priced in an October Fed hold but pushed a December rate hike up to an 87% probability. The yield on the 10-year treasury traded as high as 5.329% before settling at 5.088%. Crude oil prices moved higher with Brent briefly hitting $110 a barrel on Friday as Iran sank several tankers in the Strait of Hormuz. Crude settled the week at $101.57 a barrel and the Energy (XLE) sector was able to post a new high during the period.

Debt concerns to build out AI infrastructure pressured AI-related and semiconductor stocks leaving the Technology (XLK) sector sharply lower and ending a four-week win streak for the NASDAQ. Shares of CoreWeave (CRWV) were down -30% after announcing a new financing deal last week. The Philadelphia Semiconductor Index (SOX) went into the weekend on a nine-day losing streak, the longest since May 2006, and entered into a bear market, down -23% since since hitting a new record high in June. Also weighing on semiconductors was growing competition from China with memory chips taking on the chin. Despite the selloff in technology shares, seven of 11 sectors closed the period higher as investors rotated funds into other market groups as economic data remained strong. Consumer Staples (XLP), Energy (XLE), Healthcare (XLV) and Materials (XLB) outperformed soaring more than +3%. A week after the S&P 500 and NASDAQ set new all-time highs, the major averages struggled to hold key Moving Average support levels and Friday's selloff left the DJIA, S&P 500 and NASDAQ all below their respective 50 and 100-day MA. Next up, is another full slate of earnings with FactSet Research estimating year-over-year earnings growth of 29.6% and a fresh read on housing numbers as bullish investors try to regroup.

For the period, the DJIA gained 347.46 points (+0.7%) and settled at 52002.41. The S&P 500 lost by 152.10 points (-1.9%) and closed at 7659.44. The NASDAQ dropped 1226.14 points (-4.5%), finishing at 26140.03. The small cap Russell 2000 tumbled 86.30 points (-3.1%) and settled at 2721.37.

Market Outlook: The technical condition of the market is mixed as the DJIA and NASDAQ diverge from each other, while the S&P 500 remains stuck in a narrow range. The technical indicators show Momentum, as measured by the 14-day RSI, neutral but improving for the DJIA, neutral and slowing for the S&P 500, and slipping to negative ground for the NASDAQ and NASDAQ 100. The S&P 500 also saw a bearish cross in the MACD, a short-term trend gauge, while the MACD for the NASDAQ and NASDAQ 100 is firmly in bearish territory. Stochastics show the NASDAQ and NASDAQ 100 closed out the week oversold which could lead to a bounce over the near-term if investors buy the dip. Of note is that the different indexes struggled on both sides of key MA support/resistance levels during the period. Friday's selloff, however, did technical damage to the different indexes leaving them below key support. The rally in the DJIA stalled at its 50-day MA and the blue-chip index joined the S&P 500, NASDAQ and NASDAQ 100 below their respective 50 and 100-day MA, a negative connotation. The secondary indexes underperformed as the Russell 2000 dropped into correction territory, down more than -10% from its August high and the Philadelphia Semiconductor Index (SOX) tumbled -11.4% this week alone.

For a second straight week the sector map showed a rotation into defensive market groups with seven of the 11 sector ETFs closing higher for the week. The move away from mega-cap technology and semiconductor stocks helped defensive market groups outperform with Consumer Staples (XLP) and Healthcare (XLV) and Energy (XLE) hitting new highs during the period. Eight of the 11 sector ETFs are trading below their 50 and 100-day moving averages (MAs), while four are below their 200-day MA, a negative over the near-term.

Underlying market breadth remains abysmal and deteriorated for a ninth consecutive week. The NYSE Advance/ Decline line, which is considered a leading indicator of market direction, topped out in mid-August and has worked lower since then, while the NASDAQ A/D line peaked in June. New 52-week lows on the NYSE and NASDAQ expanded and outnumbered the new highs by a wide margin for a ninth consecutive week.

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, unchanged from the previous week. Cycles B, C, D are Bullish, while Cycles A and E are Bearish. The CTI is projected to change to a negative configuration next week.

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, unchanged from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 287 units while the number of new 52-week lows exceeded the number of new highs on all five sessions. Breadth was also negative at the NASDAQ as the A/D line dropped 5718 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 27.8% vs. 26.4% the previous week, while those above their 200-day moving average eased to 43.1% vs. 43.5% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth remains abysmal and deteriorated for a ninth consecutive week. The NYSE Advance/ Decline line, which is considered a leading indicator of market direction, topped out in mid-August and has worked lower since then, while the NASDAQ A/D line peaked in June. New 52-week lows on the NYSE and NASDAQ expanded and outnumbered the new highs by a wide margin for a ninth 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 -5, unchanged from the previous week.

Professional investors increased equity holdings during the period with the National Association of Active Investment Managers (NAAIM) Exposure Index jumping to 95.6% from 83.0% the prior week.  Retail bulls saw a small downtick easing to 38.7% from 40.3% according to the Association of Individual Investors (AAII) but remained above the historical average of 37.5%.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Neutral as of the week ending 10/16/2026 (DJIA - 52,002.41). 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 (31) - What's Not (141): Of the 172 Industry Segments that we track, 31 are rated as either Strong or Improving while 141 are regarded as Weak or Deteriorating. The Previous Week's totals were 25-172. The following are the strongest and weakest Industry Segments for the period ending 10/15/26. Strongest: Oil & Gas Refining Marketing, Medical Equipment Distributors, Toys & Games and Oil & Gas Exploration & Production. Weakest: Pulp & Paper Products,  Parcel Delivery, Other Transportation 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 10/15/26 were: Specialty Health (+4.00%, Specialty Retail (+3.60%), Sector-Consumer Staples (+3.58%), Commodity-Energy (+3.26%) and Sector-Consumer Discretionary (3.15%). The weakest categories were: Specialty Technology (-7.41%), Sector-Alternative Energy (-4.67%), International-Ex Europe (-4.58%), International -Emerging (-3.56%) and Growth-Large Cap (-1.89%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT