Last week's story was improving breadth without enough advancing trends to support it. This week, the breadth repair broke too. Wednesday briefly strengthened the recovery case, but Thursday's selling erased that progress. Friday's modest rebound left the market Neutral — Fading, with less support beneath the index than a week ago.
The rally failed its confirmation test
Wednesday brought participation above the 50-day average to a six-week high of 57.4%. Yet advancing participation was still shrinking that day. By Friday, only 47.9% remained above that average. The warning from Stage 2 proved more durable than the burst of price strength.
That fits the broader six-week story. Advancing participation stood at 40.8% at the end of September and is now 27.5%. The five-session balance between stocks moving from basing into advancing trends and those moving from advancing into topping has been negative for 30 sessions. This week's counts were 17 entering from Stage 1 against 127 moving into Stage 3.
There is still a constructive counterweight. New 52-week highs have exceeded new lows for 17 sessions, and the S&P 500 remains above its 200-day average. Those facts argue against treating weakness as universal. They do not establish a broad recovery.
Two leadership reads broke down
Our earlier technology rebuild language was wrong. Improving participation had not earned that description without price confirmation. Technology lost 6.5% this week, and its advancing share is now 36.9%. Semiconductor participation has fallen to 24.1%, with its 20-session change now negative 18.5 percentage points. The tentative repair has become renewed deterioration.
Energy's apparent stabilization also failed. It was the week's weakest sector, down 11.3%. Its Stage 2 share is 48.3%, down 17.6 percentage points over 20 sessions. Energy still has the strongest sector relative-strength score, but that is plainly compatible with substantial damage.
Materials led the week with a 3.4% gain, followed by communication services at 2.4%. Neither establishes replacement leadership: both still have shrinking advancing participation over 20 sessions.
The surviving rotation stays selective
Health care now leads sector returns over both one and three months. Healthcare plans have strengthened from 60% advancing participation last Friday to 80%. That industry story has gained substance, even as the broader sector's Stage 2 share slipped to 36.6%.
Financials deserve a less uniformly negative reading than last weekend. Advancing participation has improved to 25.1% from 23.9%. Insurance provides evidence beyond exchanges, with property and casualty insurers at 56.1% in Stage 2. But the sector's 20-session loss remains 19.3 percentage points, and exchange participation retreated from its midweek improvement.
Staples' retail pockets held their ground. Grocery and discount stores each retain 44.4% advancing participation, while household and personal products stand at 58.8%. These are useful areas for screening, not evidence that the whole market has repaired.
Established trends still need scrutiny
Apple remains among the established advancing names, sitting 1.9% above its 50-day average. Taiwan Semiconductor Manufacturing also remains in that group, but is 13% below its average with a setup score of 2.4 out of 10. An established Stage 2 label does not make every chart equally healthy. Eli Lilly retains a stronger setup score of 7.8, though it sits 11.5% above its average.
For the week ahead, the important test is whether rebounds begin replenishing advancing trends. Another broad up day without that improvement would leave the central warning intact. The screen continues to find individual setups; their existence is no substitute for improving market participation.
| Stock | Sector | Move | Setup |
|---|---|---|---|
| Academy Sports and Outdoors | Consumer Discretionary | 1→2 | 8.8 |
| Tradeweb Markets | Financials | 1→2 | 8.7 |
| MSCI | Financials | 1→2 | 7.8 |
| EPAM Systems | Information Technology | 1→2 | 7.8 |
| OGE Energy | Utilities | 1→2 | 7.8 |
| Booz Allen Hamilton Holding | Industrials | 1→2 | 7.4 |
| Vertex | Information Technology | 1→2 | 7.3 |
| Albany International | Consumer Discretionary | 1→2 | 7.0 |
| Stock | Sector | Setup | RS |
|---|---|---|---|
| JAKKS Pacific | Consumer Discretionary | 9.8 | 95 |
| Kohl's | Consumer Discretionary | 9.4 | 80 |
| Arhaus | Consumer Discretionary | 9.4 | 88 |
| Xencor | Health Care | 9.3 | 97 |
| SI-BONE | Health Care | 9.3 | 89 |
| Manhattan Associates | Information Technology | 9.3 | 83 |
| Ardent Health | Health Care | 9.3 | 68 |
| Braze | Information Technology | 9.2 | 91 |
| Sector | 1D | 1M | 3M | RS | Stage 2 |
|---|---|---|---|---|---|
| Industrials | +2.3% | -3.7% | -7.9% | 63 | 20% |
| Information Technology | +1.9% | -12.2% | -6.9% | 64 | 37% |
| Materials | +0.7% | -0.1% | -5.4% | 74 | 13% |
| Communication Services | +0.7% | -13.3% | -13.0% | 52 | 22% |
| Health Care | +0.2% | +10.1% | +11.4% | 75 | 37% |
| Consumer Discretionary | +0.2% | +4.9% | -1.9% | 54 | 22% |
| Energy | -0.2% | -5.0% | +1.5% | 82 | 48% |
| Utilities | -0.2% | +5.6% | +1.3% | 57 | 17% |
| Real Estate | -0.5% | +7.6% | -0.2% | 65 | 13% |
| Financials | -0.5% | +4.5% | -1.0% | 66 | 25% |
| Consumer Staples | -1.3% | +9.1% | +8.3% | 71 | 28% |
Work the same data yourself: open the full stock screener, see where money is moving on the sector rotation page, or check the market-timing read. New to the method? Start with the four stages.
Stage2Stocks is an educational stage-analysis screener. These wraps describe what the screen shows across US-listed stocks. They are not investment advice, recommendations, or buy/sell calls. Always do your own research.