August 28, 2026

The major averages held their own this week despite rising rates linked to hawkish comments from Fed Chair Kevin Warsh. Choppy trading early in the week saw the different indexes mixed and little changed as investors waited on earnings from AI chip maker Nvidia (NVDA) which was battling to end a seven-day losing streak on Tuesday. Blowout earnings from Nvidia, coupled with gains of +20%+ in software giants Salesforce (CRM) and CrowdStrike (CRWD) sparked a rally in tech stocks on Thursday with the Tech-Software ETF (IGV) soaring +7.58% and hitting a new high for the year. However, 10 of the 11 sectors closed the day in the red.  Earnings from box retailers were a hit-or-miss with shares of Abercrombie & Fitch (ANF), Kohl's (KSS) and Gap (GAP) moving sharply higher but were offset by tumbles in Dick's Sporting Goods (DKS), Dollar Tree (DLTR) and Ulta Beauty (ULTA). Fed Chair Warsh's speech on Friday focused on returning inflation to the committee's 2% target and flipped expectations for a rate hike at the September FOMC meeting from 35% on Thursday to 57.5% as the week ended. While the rate on the 10-year Treasury was little changed at 4.731%, the yield on the two-year T-Bill jumped to 4.368% from 4.235% on Monday. Crude oil prices eased to $83.38 a barrel on Strait of Hormuz optimism, while gold prices moved lower off a three-month high on Warsh's inflation concerns. The US Dollar rallied on Friday as yields ticked higher crossing above its 200-day MA but closing just shy of its 100-day MA. Crypto currencies also rallied during the period with Bitcoin crossing briefly  above $80k before pulling back on Friday. Friday's weakness on the Fed Chair's comments wasn't enough to erase the week's gains and the major averages were able to finish the period with modest gains with the DJIA snapping a two-week losing streak. With Q2 earnings all but done, market participants will look to end-of the-month jobs and manufacturing data as the market rolls into the ominous month of September.

For the period, the DJIA tacked on 282.98 points (+0.5%) and settled at 53559.99. The S&P 500 added 37.39 points (+0.5%) and closed at 7711.76. The NASDAQ gained 221.97 points (+0.8%), finishing at 26402.42. The small cap Russell 2000 was down for a second straight week falling 45.50 point (-1.5%) and settled at 2972.37.

Market Outlook: The technical condition of the market was little changed with the technical indicators closing the week mixed but market under currents deteriorated. MACD, a short-term trend gauge, was negative to neutral for the major averages, while Momentum, as measured by the 14-day RSI, wavered in bullish ground. The VIX, however, fell into the 14's, last hit in early January, showing traders are not yet concerned with a deeper pullback. A look at the weekly charts shows the longer-term outlook for the major averages remains bullish but momentum has slowed for the S&P 500 and NASDAQ. The NASDAQ 100 gapped back above its 50-day MA on Thursday, a positive, but the secondary indexes, which include the DJ Transportation Index, small cap Russell 2000 and Philadelphia Semiconductor Index (SOX) were lower showing negative divergence as all three traded below key moving average support levels. The Russell 2000 dipped below its 50-day MA on Friday, while the Transports and SOX both closed below their respective 50 and 100-day MA which is a cautionary signal and a warning investors may want to be less aggressive over the near-term.

The market sectors are also showing negative divergence as only three of the 11 sectors finished in the plus column. In addition, the technical indicators for the sector ETFs have slipped into a neutral but mixed position with slowing momentum. Technology (XLK), Communication Services (XLC) and Financial (XLF) closed higher, while Healthcare (XLV), Energy (XLE), Industrial (XLI), REITs (XLRE) and Materials (XLB) were all down more than -1%. Utilities (XLU), Industrial (XLI), REITs (XLRE) and Communication Services (XLC) are trading below or struggling at key moving average levels.

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 B, C, D are Bullish, while Cycles A and E are 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 Negative at -6, down four notches from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line lost 439 units while the number of new 52-week highs exceeded the number of new lows on four of the five sessions. Breadth was also mixed at the NASDAQ as the A/D line fell 1954 units while the number of new highs out did the new lows on four days. Finally, the percentage of stocks above their 50-day moving average rose to 56.5% vs. 54.8% the previous week, while those above their 200-day moving average increased to 60.7% vs. 59.9% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth lost ground for a second week with the NYSE and NASDAQ Advance/Decline lines both lower. New highs outnumbered the new lows but the new highs on the NYSE contracted during the week pointing to a narrowing number of stocks holding the market up.

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 -4, up a notch from the previous week.

Investors are still bullish but we're seeing more divergence in retail and professionals. The Association of Individual Investors (AAII) listed retail bulls at 32.9%, the lowest percentage since late July while remaining below the historical average of 37.5% for an eighth time in the last nine weeks. The National Association of Active Investment Managers (NAAIM) Exposure Index saw the professional expand exposure to 102.7% going on margin for the first time since mid-December. Bears are hard to find among investment advisors with the Percentage of Bearish Investment Advisors at only 17.3% marking a 10th consecutive week below 20%. Finally, according to FINRA, there was a small reduction in Margin accounts in July coming off a record high in June. These readings can become contrarian indicators when values are stretched but only the NAAIM exposure index is currently at that level.

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 8/27/26. Strongest:, Security Software & Systems, Oil & Gas Refining Marketing, Other Business Services and Movie Theaters. Weakest: Pulp & Paper Products, Other Infrastructure, Semiconductors and Parcel Delivery. 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 8/27/26 were: Sector-Basic Materials (+3.71%), Specialty Financial (+2.35%), Sector-Internet (+2.03%), Specialty Technology (+1.83%) and Commodity-Precious Metals (+1.74%). The weakest categories were: Commodity-Energy (-2.44%), Sector-Energy (-1.46%), Shorts (-1.34%) and Sector-Real Estate (-0.98%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT