October 23, 2026

A volatile week for technology stocks with investors rotating into cyclical and defensive sectors left the major averages mixed this week. Coming off the prior week's 'tech wreck', market participants scooped up beaten down semiconductors and AI-related shares to start the period as the Philadelphia Semiconductor Index (SOX) was able to snap a nine-day losing streak. Despite the tech bounce, nine of 11 sectors finished the day in the red. Weaker than expected housing data pulled yields lower and equites higher on Tuesday after Home Builders Sentiment fell to its lowest read since 2012 and September Housing Starts fell -5.2% vs. +0.2% estimated. Overnight earnings from SpaceX (SPCX) reignited the AI tech trade on Wednesday sending the NASDAQ into the plus column for the week. SpaceX soared +7.85% and the SOX surged +1.97% on gains in Advanced Micro Devices (AMD) and Nvidia (NVDA). The midweek rally was short lived however, as a -7% selloff in Meta Platforms (META) and a tumble in Netflix (NFLX) drove the NASDAQ down -2.6% on Thursday with AI debt concerns also weighing on tech shares. Yields again inched lower and the yield on the 10-year Treasury slipped below 5%. A spike in oil prices on Friday rattled investors as Brent crude oil hit a multi-year high trading above $116 a barrel. While the DJIA tumbled more than 700-points at the open, the NASDAQ struggled near the flat line on buying in cyber security stock CrowdStrike (CRWD), Palo Alto Networks (PANW), Sentinel One (S) and others. Earnings during the period mostly beat estimates with shares of Cleveland-Cliffs (CLF), 3M (MMM), Northrop Grumman (NOC) and IBM (IBM) trading higher, while General Motors (GM), GE Aerospace (GE) and others dipped after issuing lower guidance. Weak economic data kept downward pressure on yields and the rate on the 10-year closed at 5.004% offsetting some of the damage to equities from higher oil prices. Next up is the October FOMC Meeting with the CME Group FedWatch projecting a 95% probability of the Fed leaving rates unchanged. Going into the meeting, the DJIA saw a third straight week of modest gains on the rotation into defensive and value shares, while the S&P 500 and NASDAQ slid for a second consecutive week. Earnings from several mega-cap technology companies in the coming week should also keep volatility at a premium.

For the period, the DJIA gained 212.22 points (+0.4%) and settled at 52214.63. The S&P 500 lost by 35.77 points (-0.5%) and closed at 7623.67. The NASDAQ dropped 184.69 points (-0.7%), finishing at 25955.34. The small cap Russell 2000 added 55.49 points (+2.0%) and settled at 2776.86.

Market Outlook: The technical condition of the market remains mixed but saw some deterioration as the major averages continue to bend but not break. The major averages vacillate between key MA support/resistance levels as most selloffs seem to be orderly with investors buying the dips. The DJIA slipped below its 50 and 100-day MA on Friday, which is negative, while the S&P 500 bounced off support at its 100-day MA on Friday but remained below its 50-day MA. The NASDAQ and NASDAQ 100 are trading below their respective 50 and 100-day MA but both tech heavy indexes remain above their 200-day MA. While the small cap Russell 2000 trades below its 200-day MA, the SOX found support at its 200-day MA, a key level to watch going forward. The technical indicators show Momentum, as measured by the 14-day RSI, neutral for the Dow Jones and S&P 500 but in negative ground and slowing for the NASDAQ and NASDAQ 100. MACD, a short-term trend gauge, is bearish for most indexes but bullish for the DJIA and Russell 2000. While the DJIA went into Friday marginally overbought, the NASDAQ and NASDAQ 100 were oversold with stochastics below 20 and could open next week with an oversold bump. With daily volatility pushing the different indexes above and below support/resistance areas, traders seem to be using these key levels for short-term trades until we see the indexes break one way or the other. Expect more volatility as investors turn their focus on next week's FOMC meeting and the upcoming mid-terms.

The sector map shows a rotation into defensive and cyclical market groups with eight 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 Energy (XLE), Healthcare (XLV), REITs (XLRE) and Utilities (XLEU) outperforming. In addition, Energy (XLE), Consumer Staples (XLP) and healthcare (XLV) hit new highs during the period. Only two sectors, Communication Services (XLC) and Industrial (XLI) are below their 50/100 and 200-day MA compared to four the prior week which also shows modest improvement in the internal positioning of 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 Negative at -1, down six notches from the previous week. Cycles C, D are Bullish, while Cycles A, B and E are Bearish.

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 -6, down four from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 72 units while the number of new 52-week lows exceeded the number of new highs on all five sessions. Breadth was mixed at the NASDAQ as the A/D line added 238 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 rose to 34.7% vs. 27.8% the previous week, while those above their 200-day moving average eased to 42.5% vs. 43.1% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth improved slightly this week after weeks of deteriorating. The NYSE and NASDAQ Advance/ Decline lines, which are considered leading indicators of market direction, ticked higher for the first time in a few weeks which helps to confirm a broadening out of the trade and a rotation into more defensive sectors. While new 52-week lows continue to dominate the new highs, there was marginal contraction in the new lows which is a positive.

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 Neutral at +0, up five notches from the previous week.

There was also contraction in most investor surveys. While professional investors increased equity holdings during the period with the National Association of Active Investment Managers (NAAIM) Exposure Index climbing to 86.7% from 74.5% the prior week, the Percentage of Bullish Advisors fell to a neutral 49.1% from 55.5%.  Retail bulls saw another small downtick for a second straight week easing to 36.9% from 38.7% according to the Association of Individual Investors (AAII) and dipping below the historical average of 37.5%.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bearish as of the week ending 10/23/2026 (DJIA - 52,214.63). 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 (45) - What's Not (127): Of the 172 Industry Segments that we track, 45 are rated as either Strong or Improving while 127 are regarded as Weak or Deteriorating. The Previous Week's totals were 31-141. The following are the strongest and weakest Industry Segments for the period ending 10/22/26. Strongest: Toys & Games, Oil & Gas Refining Marketing, Medical Equipment Distributors, and Home Healthcare. Weakest: Pulp & Paper Products, Parcel Delivery, Other Infrastructure and Other Transportation. 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 10/22/26 were: Specialty Financial (+3.79%), Sector-Consumer Staples (+3.19%), Specialty Utilities (+2.66%), Value-Mid Cap  (+2.22%) and Bond-Government Long Term (1.91%). The weakest categories were: Specialty Technology (-5.99%), Sector-Telecom (-4.61%), Specialty Communications (-4.61%), Sector-Internet (-4.20%) and Sector-Alternative Energy (-3.88%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT