November 7, 2025

A volatile week that saw cracks in the armor of the Mag 7 and AI-related trade ended lower this week as concerns of high stock valuations and the extended government shutdown weighed on equities. The bulls and bears were in a tug of war as a mixed start to the week gave way to a bout of selling after Goldman Sachs and Morgan Stanley warned of a potential market selloff with AI-related and semiconductor stocks hit hard. The Philadelphia Semiconductor Index (SOX) sank -4.01%. The Mag 7 led the major averages down with the tech heavy NASDAQ dropping 486.09 points (-2.04%). As has been the case all year, investors jumped in and bought the dip on Wednesday with AI and semiconductors leading the rebound. Better than expected economic data helped boost stocks, but yields ticked higher with the rate on the 10-year Treasury rising to 4.16%, its highest level since September before the Fed's easing cycle began, before closing the period at 4.096%. A surprise jobs report from Challenger on Thursday had the bulls heading for the exits again with a report that job layoffs year-to-date topped 1 million, with 153k in October, a 20-year high. High flyers and Mag 7 were slammed again with the SOX down another -2.39%. Earnings were a hit or miss with several tech giants releasing blowout numbers only to trade sharply lower, while companies that issued lower guidance were also punished. Crypto currencies were another casualty of the pullback with Bitcoin dipping below $100k, down -20% from its early October high, before a bounce ahead of the weekend left it at $103,470. The selloff left the market sectors mixed with Energy (XLE), Healthcare (XLV), REITs (XLRE) and Financial (XLF) market groups higher. Technology (XLK) was the weakest market group, down -4.16%, followed by losses in Communication Services (XLC), Consumer Discretionary (XLY) and Industrial (XLI). November is off to a rough start with the major averages snapping a two-week win streak with headwinds mounting. Next week we'll see earnings begin to wind down, but all eyes will be on whether or not the government shutdown remains an issue. Investors will also be watching whether the Supreme Court votes down President Trump's tariffs which could lead to a rally depending on the ruling. As we saw on Friday's reversal those headwinds could quickly become tailwinds when resolved.

For the period, the DJIA fell 575.77 points (-1.2%) and settled at 46987.10. The S&P 500 gave up 111.40 points (-1.6%) and closed at 6728.80. The NASDAQ dropped 720.42 points (-3.0%) finishing at 23,004.54, while the small cap Russell 2000 lost 46.56 points (-1.9%) and settled at 2432.82.

Market Outlook: The technical condition of the market deteriorated this week with the NASDAQ turning in one of its worst weekly performances since April. The negative divergences that have been playing out the last few weeks are now confirming that the rally has been running on fumes despite recently hitting new highs. The technical indicators are now in negative to neutral ground with MACD, a short-term trend gauge, crossing into bearish territory for the different indexes, while Momentum, as measured by the 14-day RSI, is neutral but slowing. A sell signal was given for the S&P 500 and NASDAQ by the ADXR, with a bearish DI- cross above the DI+ and a rising ADX line. The S&P 500 and NASDAQ briefly traded below their respective 50-day MA on Friday before crawling back above it at the close. The Russell 2000 fell below that support level earlier in the week. The equal-weight S&P 500 fell below its 50 and 100-day MA but rallied on Friday to regain its 100-day at the close confirming that the broader market is weak with narrowing breadth. Market technicians will note that we saw the different indexes gap down at the open on Tuesday and Friday, but Friday's gap was filled on the charts which could bring buyers in on Monday. Finally, as the period ended only 38% of stocks in the S&P 500 are trading above their 50-day MA showing most stocks are deeper in the throes of a sell-off than the major averages. Last week downside targets were noted for the DJIA at 45,500-45,600 and 6550-6600 for the S&P 500. The NASDAQ has support at 22,200-22,400. While it doesn't look at this time that a 10% or greater correction is in the cards, if those levels are breached, we could see a test of the October lows.

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 -6, unchanged from the previous week. Cycles A and D are bullish, while Cycles B, C and E are bearish. The CTI is projected to remain in a negative configuration into December.

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 -8, down six notches from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 645 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 3952 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 dropped to 37.6% vs. 46.0% the previous week, while those above their 200-day moving average fell to 60.1% vs 63.7% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth deteriorated this week with the NYSE and NASDAQ Advance/Declines lower showing more stocks are under distribution than under accumulation. New 52-week lows outnumbered the new highs on the NYSE and NASDAQ for the first time in 25 weeks. The new highs continue to contract meaning a smaller group of stocks are leading the market higher.

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.

Investor sentiment is bullish, but there was a notable drop in retail bulls. The latest survey from the American Association of Individual Investors (AAII) survey saw retail bulls slip to 38% from 44.0% the prior week. The National Association of Active Investment Managers (NAAIM) Exposure Index shows the professionals are fully invested but took a few chips off the table coming in at 90.1% from 100.8% last week. Finally, the Percentage of Bullish Investment Advisors increased to a bearish 59.3%, which is just below the high hit in December 2024. These Sentiment Indicators become contrarian signals when they reach extreme levels, and the lack of bearish investors is another red flag for equities going forward. 

Market Posture: Based on the status of the Market Edge, market timing models, the Market Posture is Bearish as of the week ending 10/24/2025 (DJIA - 47207.12). 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 (6) - What's Not (24): The following are the strongest and weakest Industry Groups for the period ending 11/06/25. Strongest: Technology Hardware, Healthcare Products Metals & Mining, and Energy. Weakest: Paper & Forest Products, Building Materials, Food, Beverage & Tobacco, and Chemicals. 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 11/06/25 were: Specialty Health (+1.47%), Commodity-Energy (+1.29%), Shorts (+1.06%) and Sector-Alternative Energy (+0.60%). The weakest categories were: Specialty Technology (-3.67%), Sector-Basic Materials (-2.94%), Sector-Internet (-2.55%), Growth-Mid Cap (-2.45%) and Specialty Natural Resources (-2.42%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT