May 22, 2026

The major averages staged a late-week rally on strong earnings and improving Middle East negotiations, lifting the DJIA to record highs and pushing the S&P 500 to an eighth consecutive week of gains. The period began with a choppy session as investors turned risk-off and rotated into defensive and secular sectors. Concerns that memory chip makers may struggle to meet soaring demand weighed on semi-conductor related stocks. Equities also came under pressure from rising bond yields, as expectations for higher inflation tied to increasing oil prices caused the major averages to retreat again on Tuesday, though they managed to hold near-term support levels. On Wednesday, stocks rebounded after the Trump administration told reporters that the U.S. was in the 'final stages' of negotiations with Iran, helping push oil prices back below the $100-per-barrel mark. The major averages stumbled out the blocks on Thursday as oil initially moved higher again, but news that the U.S. government would award $2B in grants to quantum computing companies led to sharp gains across the board, while the DJIA finished at a new record high. On Friday, the S&P 500 touched a new record high intraday before pulling back, as optimism surrounding continued profit growth from the AI buildout gained momentum despite a fraught macro backdrop.

The S&P 500 notched its longest weekly streak in two and half years as the benchmark index is on track for its highest earnings growth rate since late 2021, with Q1 growth estimated at 28.4%. The 10-year Treasury yield pulled back to 4.558%, but the two-year Treasury note finished at 4.123%, its highest level since February 2025. Sector outperformances were led by Utilities (XLU), Health Care (XLV) and Real Estate (XLRE) each surging above +3.0% for the period. Sector underperformances were led by Communications Services (XLC) and Materials (XLB), which both finished in the red.

For the period, the DJIA was higher by 1053.53 points (2.1%) and settled at 50579.70. The S&P 500 gained 64.97 points (0.9%) and closed at 7473.47. The NASDAQ climbed 118.83 points (0.5%), finishing at 26343.97. The small cap Russell 2000 rose by 76.06 points (2.7%) and settled at 2869.36.

Market Outlook: The technical condition of the market remains positive, as the major averages were able to work off much of last week's overbought conditions. The technical indicators are mixed to positive for the major averages, with MACD—a short-term trend gauge—still positive but beginning to ease while Momentum, as measured by the 14-day RSI, was essentially flat for the week. The DJIA went on to post a new record high, while the S&P 500, NASDAQ and NDX 100 remained close to reaching their own record levels. The 50-day moving average continues to slope upward for the major averages, confirming the intermediate trend, although the 200-day MA remains relatively flat. The advance in equities was accompanied by low volatility, with the VIX, often referred to as the market's fear gauge, falling to its lowest level since early February. Key secondary indexes, including the Philadelphia Semiconductor Index (SOX), recouped all of their early-week losses and surged to a new 52-week high. However, the late-week rally led to stochastic readings approaching or above the 80 level; an area typically associated with near-term overbought conditions.

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 -3, unchanged from the previous week. Cycles A and B are bullish, while Cycles C, D and E are bearish. The CTI configuration is projected to remain negative through mid-summer.

Momentum Index (MI): The market 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 six notches from the previous week. Breadth was positive at the NYSE as the Advance/Decline line fell by 212 units while the number of new 52-week highs exceeded the number of new lows on four out of five sessions. Breadth was mixed at the NASDAQ as the A/D line was lower by 234 units while the number of new lows out did the new highs on three out of five sessions. Finally, the percentage of stocks above their 50-day moving average decreased to 59.5% vs. 61.7% the previous week, while those above their 200-

day moving average fell to 56.0% vs. 57.3% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth remained mixed to negative. The NYSE Advance/Decline Line, a leading indicator of market direction, was slightly for the week. The NYSE A/D Line broke below a range earlier in the week before improving towards the end of the period.

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 -1, up one notch from the previous week.

Investor sentiment is neutral to negative this week. The American Association of Individual Investors (AAII) saw retail bulls decrease 7.6 percentage points to 31.7%. Bullish sentiment is below their historical average of 37.5% for the first time in five weeks. However, the National Association of Active Investment Managers (NAAIM) Exposure Index shows money managers increased their equity exposure by 6% from last week, landing at 82.02%.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bearish as of the week ending 05/15/2026 (DJIA – 49526.17). 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 5/21/26. Strongest: Technology Hardware, Conglomerates, Telecommunications and Healthcare Services. Weakest: Paper & Forest Products, Building Materials, Metals & Mining and Infrastructure.

The top performing ETF categories for the week ending 5/21/26 were: Europe (+1.56%), Specialty Financial (+1.41%), Specialty-Retail (+0.67%), International-Developed (+0.62%), and Sector-Energy (+0.61%). The weakest categories were: Specialty Natural Resources (-4.97%), Specialty-Basic Materials (-2.03%), Commodity-Precious Metals (-3.77%), and Agriculture (-2.22%).

By David L. Blake, CMT