June 26, 2026

The major averages finished mixed this week as investors soured on the AI spending spree and rotated into cyclical sectors. While the NASDAQ and NASDAQ 100 turned in one of their worst weekly performances in a year, the DJIA, NYSE and small cap Russell 2000 briefly notched new record highs. Falling oil prices helped boost equities with crude dropping below $70 a barrel before a flareup in the Strait of Hormuz pushed crude higher again before settling at $69.46. Semiconductors whipsawed tech investors during the week as a -7.87% drop in the Philadelphia Semiconductor Index (SOX) on Tuesday, sparked by selling in Asia, was followed by a +3.59% jump on Thursday after Micron Technologies (MU) +14.50% spike after earnings. Semi's tumbled -5.29% again on Friday leaving the SOX with a -7.9% loss on the week. The NASDAQ was on a five-day losing streak going into the weekend, but that rotation out of semiconductors and AI-related stocks rolled into Healthcare (XLV), with the NASDAQ Biotech ETF (IBB) surging +7.9%, and Industrial (XLI) sector, with defensive market groups Utilities (XLU), REITs (XLRE) and Consumer Staples (XLP) also outperforming. Growth sectors Technology (XLK), Communication Services (XLC) and Consumer Discretionary (XLY) saw the biggest selloffs. Seven of the 11 sectors closed the period with gains. Traders lightened up on other assets with Precious Metals down as Gold hit a seven-month low, and Crypto currencies were hammered on record selling. Yields inched lower on falling oil prices as the bond market shook off expected inflation pressures in the May PCE report, the Federal Reserves preferred inflation gauge. The rate on the 10-year Treasury fell from 4.51% to start the week to close at 4.376%, while the two-year T-Bill landed at 4.094% at Friday's close. The DJIA extended its winning weekly to three led by strength in Caterpillar (CAT), Merck (MRK) and Sherwin-Williams (SHW), while the S&P 500 and NASDAQ closed the period in the red. Next, June jobs data will hit the wires in the holiday-shortened week, while investors start to look ahead to Q2 earnings, expected to jump +22%. That would be a second-straight quarter above 20% earnings growth.

For the period, the DJIA added 311.41 points (+0.6%) and settled at 51876.11. The S&P 500 lost 146.56 points (-2.0%) and closed at 7354.02. The NASDAQ dropped 1220.31 points (-4.6%), finishing at 25297.62. The small cap Russell 2000 gained 30.31 points (+1.0%) and settled at 3010.08.

Market Outlook: The technical condition of the market is again mixed with the Dow Jones, NYSE, Equal-weight S&P 500 (RSP) and Russell 2000 hitting new intraday record highs, while the S&P 500, NASDAQ, NASDAQ 100 and SOX finished sharply lower. The technical indicators are in line with the diverging indexes as the DJIA, Russell 2000 and EQW-S&P 500 show MACD, a short-term trend gauge, in bullish ground and Momentum, as measured by the 14-day RSI, positive and improving. On the other hand, the S&P 500 and NASDAQ show slowing momentum, while MACD is increasingly bearish. In addition, the NASDAQ fell below its 50-day MA, a key support level this week, while the S&P 500 struggled to hold that level all week. 

Thursday's daily market comment mentioned that AI spenders continue to get hammered, while the beneficiaries of that spending move higher. Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), Netflix (NFLX) and Tesla (TSLA) all trade below their respective 50/100 and 200-day MA's and Apple (AAPL), Nvidia (NVDA) and Alphabet (GOOGL) are below their 50 and 100-day MA's. Those overweighted stocks have also retraced between 61.8% and some, including Microsoft and Meta Platforms, 100% of the rally off the March/April lows. The Roundhill Big Tech ETF (MAGS) was down -13.6% going into Friday. The fact that the major averages are holding close to record highs, however, is a testament that the underlying rotation into cyclical sectors is so far, working, but upside for the major averages will be limited without participation from the heavyweights. Although we saw a bounce in the above-mentioned stocks on Friday, it barely registered in the closing numbers. Finally, the VIX remains elevated in the 18-19 range as traders try to balance a tech selloff and Middle East flareups with an improving earnings scenario. 
 
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 -12, down seven notches from the previous week. Cycle A is bullish, while Cycles B, C, D and E are bearish. The negative CTI configuration is projected to remain in place into July.

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 -4, up a notch from the previous week. Breadth was positive at the NYSE as the Advance/Decline line added 928 units while the number of new 52-week highs exceeded the number of new lows on four of five session. Breadth was negative at the NASDAQ as the A/D line lost 106 units while the number of new lows out did the new highs on three days. Finally, the percentage of stocks above their 50-day moving average rose to 54.0% vs. 51.4% the previous week, while those above their 200-day moving average increased to 57.7% vs. 56.2% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth is mixed as expected with the NYSE Advance/Decline Line, a leading indicator of market direction, hitting a new all-time high on Friday. The NASDAQ A/D Line has been moving in a fairly narrow range since early April indicating neither the bulls nor the bears are in control. The number of new 52-week highs in the NASDAQ have changed little over the last three weeks, but there was expansion in the number of new lows with Thursday's 344 new lows the most since March 30. The NYSE new highs continue to outnumber the new lows but have shown little progress in weeks.

Sentiment Index (SI): Measuring the marketís Bullish or Bearish sentiment is important when attempting to determine the marketís 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, down three notches from the previous week.

Investor sentiment shows investors are back in the bullish camp with Bears once again hard to find, which can be a negative. The American Association of Individual Investors (AAII) survey saw retail investors jump for a second-straight week to 44.9%, the first time the bulls have registered above their 37.5% historical average in five weeks. The National Association of Active Investment Managers (NAAIM) Exposure Index has the Bulls 'all in' at 98.6%, the most exposure to equities since the last week in December.  Even the Percentage of Bullish Investment Advisors saw a jump in Bulls, to 55.8% compared to only 17.3% Bears. That's the most disparity between the two since the last week of February. Although not overly aggressive at this stage, these indicators become contrarian signals when they reach excessive levels.

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 - 50,579.70). 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 (16) - What's Not (14): The following are the strongest and weakest Industry Groups for the period ending 6/25/26. Strongest: Technology Hardware, Healthcare Services, Construction and Conglomerates. Weakest: Paper & Forest Products, Agriculture, Metals & Mining and Telecommunications. 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 6/25/26 were: Specialty Health (+4.57%), Specialty Real Estate (+4.44%), Blend-Small Cap (+3.86%), Specialty Utilities (+3.15%) and Growth-Small Cap (+2.84%). The weakest categories were: Commodity-Precious Metals (-6.82%), Sector-Basic Materials (-5.38%), Sector-Internet (-4.53%), Commodity-Base Metals (-4.24%), and Specialty Natural Resources (-3.98%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT