August 14, 2026

The major averages struggled to start the week as stalled talks between the US and Iran led to a surge in oil prices. Investors also marked time ahead of key inflation reports later in the week. The different indexes nudged higher on Wednesday after the July CPI came in as expected, up +0.1% and +3.4% Y/Y, and yields ticked lower. The AI-infrastructure trade got a boost the same day as strong earnings from CoreWeave (CRWV) and Nebius Group (NBIS) easily beat estimates. Chipmakers rallied with the Philadelphia Semiconductor Index (SOX) jumping +2.49%. The DJIA lagged the broader market as Home Depot (HD) pulled back on a report the CEO would be taking a medical leave. A lower-than-expected July PPI sparked a rally in equities on Thursday coming in unchanged and +4.7% Y/Y. The S&P 500 and small cap Russell 2000 hit new all-time highs following the report with the S&P 500 briefly crossing above 7800 for the first time. Netflix (NFLX) led the gains with a +5.43% spike after Bill Ackman's Pershing Square Capital revealed a new position in the company. Financials were also strong as JP Morgan (JPM), Bank of America (BAC) and Charles Schwab (SCHW) notched new record highs. Equities were mostly lower on Friday after July Retail Sales fell -0.6% and Consumer Sentiment dropped to 51 vs. 55 expected. A choppy week in the bond market left the rate on the 10-year Treasury flat at 4.693%, but the rate on the two-year T-Bill fell to 4.18% after starting the week at 4.22%. Crude oil prices ended the period higher climbing to $82.29 a barrel on the stalled talks to open the Strait of Hormuz. The market gains were mostly across the board with nine of 11 sectors higher. While the DJIA struggled during the period and closed with a modest loss, the S&P 500 and NASDAQ traded higher for a third consecutive week. As Q2 earnings season winds down, most of the different indexes are at, or near new highs with a light week of economic data ahead. That could lead to some backing and filling of prior gains as the major averages work off an overbought condition.

For the period, the DJIA lost 304.52 points (-0.6%) and settled at 53732.41. The S&P 500 added 28.12 points (+0.4%) and closed at 7785.76. The NASDAQ tacked on 38.54 points (+0.1%), finishing at 26729.16. The small cap Russell 2000 gained 33.93 point (+1.1%) and settled at 3068.42.

Market Outlook: The technical condition of the market improved this week as new highs were hit by the S&P 500, Equal-Weight S&P 500, NYSE and Russell 2000. In addition, several Mid-Cap Growth ETFs ended the period at new highs including S&P Mid-Cap Growth (IJK), Russell Mid-Cap Growth (IWP) and Vanguard Mid-Cap Growth (VOT). The technical indicators for the major averages are mostly in bullish ground with Momentum, as measured by the 14-day RSI, improving. One exception is in the DJIA, which hit a new high the prior week. While some of the technical indicators slipped back to a neutral position, the Dow Jones formed a 'flag pattern' which is a continuation pattern. A flag pattern signals that a strong trend is taking a pause on declining volume and the stock or index should breakout in the same direction as the original move.  The secondary indexes, which include the DJ Transportation Index, Russell 2000 and Philadelphia Semiconductor Index (SOX) outperformed this week which is also a bullish sign as investors take on more risk. Market technicians prefer to see these indexes lead the market higher or lower. The lone hitch here is that after a +17% jump since its July 29 bottom, the SOX closed the week overbought and has struggled to break above its 50-day MA. A move above that resistance level should induce further buying in semiconductors. Finally, after 2-3 weeks of gains the different indexes finished the period overbought with stochastics in the 90s which could lead to some consolidation over the near-term. The exception once again is the DJIA which worked off its overbought condition during the week in choppy trading.

The market sectors continue to show a broadening out of leadership with the Financial (XLF), Healthcare (XLV) and Industrial (XLI) sectors hitting new highs this week. Energy (XLE) and Materials (XLB) closed mere points away from their own all-time highs. As noted last week nine of 11 market groups are trading above key MA support/resistance levels. Communication Services (XLC) got a boost from the spike in shares of Netflix (NFLX) and now trades above its 50 and 100-day MA but stalled at its 200-day MA as it recovers from weakness in Meta Platforms (META) and Alphabet (GOOGL).

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 A, B, C, D are Bullish, while Cycle E is 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 Positive at +4, up four notches from the previous week. Breadth was positive at the NYSE as the Advance/Decline line added 765 units while the number of new 52-week highs exceeded the number of new lows on all five sessions. Breadth was also positive at the NASDAQ as the A/D line gained 1542 units while the number of new highs out did the new lows on each day. Finally, the percentage of stocks above their 50-day moving average jumped to 64.0% vs. 56.8% the previous week, while those above their 200-day moving average rose to 61.8% vs. 59.8% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth remains supportive of higher prices with the NYSE Advance/Decline Line, a leading indicator of market direction, hitting a new record high this week. The number of new 52-week highs on the NASDAQ outnumbered the new highs for a second straight week and hit 392 on Thursday, the most since late May. The NYSE new highs also are beating the new lows.

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 -6, down two notches from the previous week.

Investors are still very bullish but there was a slip in the retail bulls to 34.7%, a touch below their historical average of 37.5% for a sixth time in the last seven weeks. The National Association of Active Investment Managers (NAAIM) Exposure Index show investment managers are once again 'all in' jumping to 95.5%. That's up from 79.7% just two weeks ago as the professionals bought the breakout in equities. The Percentage of Bearish Investment Advisors was steady at 14.8%, its lowest percentage since the first week of June. However, that could be a sign that investors are getting too complacent. A VIX in the 14's also shows that traders aren't too concerned that we'll see a significant pullback over the near-term.

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 (104) - What's Not (68): The following are the strongest and weakest Industry Segments for the period ending 8/13/26. Strongest: Full-Service Restaurants, Other Construction, Movie Theaters and Medical Laboratories. Weakest: Other Infrastructure, Special Purpose Acquisition Companies, Renewable Energy and Computers & Servers. 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 8/13/26 were: Sector-Energy (+5.42%), Commodity-Energy (+5.17%), Specialty Technology (+3.60%), Specialty Natural Resources (+3.50%), and Growth-Mid Cap (+3.38%). The weakest categories were: Shorts (-2.73%), Commodity-Base Metals (-0.93%) and Specialty Retail (-0.27%).  To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT