Last week, I wrote that Friday's close was a key sign. As it turns out, last Friday was a down day, but the day's action remained inside the support zone, which I've drawn as a blueish gray rectangle on the chart above.
Then, the week started with an open at the bottom of that support zone and pushed lower ... only to have an impressive rally by the end of the day. Perhaps we had found support?
Since then, Monday's bullish action has seen no positive follow-through.
Now, after Thursday's close, we can see that IWV (the Russell 3000 ETF, which represents ~98% of the US stock market) closed right at the bottom of this support zone. While we might find comfort that the support is holding, there are a lot of weak charts and few signs of a turn-around.
If we look beneath the surface, the Advance-Decline line paints a pretty bleak picture. Remember the AD line (bottom pane above) is simply the number of advancing stocks minus the number of declining stocks. Since last Friday, the AD line has fallen off the cliff indicating that more stocks are declining.
Taking another view of IWV, this third chart shows (in the bottom pane) that only 46% of the IWV constituents are above their own 200-day moving average. Said differently, this means that 54% of the IWV constituents - which, remember, represents about 98% of the US Stock Market - are in a technical downtrend.
While the year started off with some encouraging signs, right now the US stock market does not look very healthy. While the S&P 500 is only down 2.50%, and the Russell 3000 is only down 2.49%, they look very vulnerable.
So, once again, Friday's action could be telling. Friday morning, we will get the latest report on jobs. This, you may recall, was my #1 concern going into 2026. Yes, the war with Iran has naturally been added to that list, but the jobs report could spark a rally off the support ... or down lower through that support.
If you are a client of ours, this is why we are positioned the way that we are right now.
If you are not a client of ours, feel free to reach out. We would be happy to chat further.
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