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This Week on Wall Street
Week of July 20, 2026
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Market Commentary
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| The question heading into this week is whether the rotation now underway has staying power. Leadership has started to shift away from the semiconductor and megacap technology names that drove this cycle, and toward value corners of the market like financials, health care, and industrials. Chips enter the week on their back foot after sliding into bear-market territory, pressured by fresh signs that the artificial intelligence field is turning more competitive. What matters from here is less the setback itself than where money moves next. If value and the broader tape keep steadying while the former leaders cool, the character of the advance changes. That is the shift worth watching from here. |
| The bigger wildcard for the week ahead sits in the Middle East. Tit-for-tat strikes between the United States and Iran have resumed, keeping the Strait of Hormuz in question and sending crude sharply higher. Prices spiked into the high $80s late in the week before easing back toward the mid $80s as fresh diplomatic signals emerged. Only a few weeks ago a memorandum of understanding had oil retreating to pre-war levels and a deal looked close at hand. Now the truce has frayed, the attacks have widened across the Gulf, and global supply buffers are thinning again. |
| Earnings move to center stage this week. Alphabet and Tesla report Wednesday, with Intel and Nestlé to follow, and the season has begun on solid footing. Of the roughly fifty S&P 500 companies that have reported so far, about 88 percent have topped earnings estimates. Underneath the headlines, participation is quietly improving. Roughly two-thirds of large-, mid-, and small-cap U.S. stocks now trade above their 200-day moving averages, the strongest reading in about two years. In plain terms, more stocks are joining the advance rather than a narrow few carrying it, and that broadening is what gives a market durability when its former leaders wobble. |
| That broadening shows up in an unusual place. It is the gap between how much individual stocks move and how much the index moves. At the index level, volatility looks calm and ordinary right now. Beneath the surface it is anything but. The average S&P 500 stock is swinging far more than the index itself, and by one measure that gap sits near the widest on record. Rotation is the reason. When some leaders fall while other groups climb at the same time, the moves cancel out inside the index and the headline number stays quiet, even as the action underneath is intense. That makes this the sort of environment where active management and stock selection tend to carry more weight, because wide dispersion rewards picking among names rather than simply owning the index. It is the same broadening in participation we noted earlier, seen from a different angle. |
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Chart of the Week
Single-Stock Volatility Has Pulled Far Above the Index
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| The line tracks the ratio of the average S&P 500 stock's three-month implied volatility to the index's, on a one-month trailing basis, going back to 1995. A reading above 1 means single stocks are expected to move more than the index itself. Earlier spikes topped out closer to 2.2 to 2.4, so the latest reading near 2.7 stands at the upper edge of three decades of data. |
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Economic Releases This Week
| Monday, July 20 | None |
| Tuesday, July 21 | None |
| Wednesday, July 22 | None |
| Thursday, July 23 | Initial Jobless Claims |
| Friday, July 24 | S&P Global U.S. Manufacturing, Services & Composite PMI (Flash, July)
New Home Sales (June)
Building Permits (June) |
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Stories to Start the Week
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| What is Newton? |
▼ 0–8
▬ 9–13
▲ 14–20
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
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| Equities |
TREND |
THIS WK |
LAST WK |
| Foreign Developed | ▲ | 15 | 13 |
| Mid Cap | ▲ | 14 | 9 |
| Small Cap | ▬ | 12 | 7 |
| Large Cap | ▬ | 10 | 12 |
| Emerging Markets | ▬ | 9 | 11 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| Corporate Bond | ▬ | 10 | 3 |
| High Yield Bond | ▬ | 9 | 9 |
| Short Term Bond | ▬ | 9 | 7 |
| Intermediate Term Bond | ▬ | 9 | 6 |
| Long-Term Bond | ▬ | 9 | 4 |
| Floating Rate Bond | ▼ | 8 | 9 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Financials | ▲ | 16 | 15 |
| Real Estate | ▲ | 15 | 7 |
| Industrials | ▲ | 14 | 10 |
| Utilities | ▬ | 11 | 7 |
| Consumer Defensive | ▬ | 10 | 10 |
| Communications | ▬ | 10 | 8 |
| Consumer Cyclical | ▬ | 9 | 8 |
| Materials | ▬ | 9 | 7 |
| Energy | ▼ | 8 | 14 |
| Health Care | ▼ | 8 | 13 |
| Technology | ▼ | 8 | 8 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Mid-Cap Value | ▲ | 17 | 13 |
| Small Value | ▲ | 15 | 10 |
| Large Value | ▬ | 11 | 13 |
| Large Growth | ▬ | 10 | 10 |
| Small Growth | ▼ | 8 | 7 |
| Mid-Cap Growth | ▼ | 5 | 6 |
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Notable Newton Moves This Week: The model leaned into the same rotation seen in prices. Real Estate jumped from 7 to 15 and Industrials rose from 10 to 14, while Financials held the top sector spot at 16. Value styles strengthened, with Mid-Cap Value up to 17 and Small Value to 15, and small- and mid-cap equities firmed broadly. Fixed income improved across the board, led by Corporate bonds (3 to 10). Energy (14 to 8) and Health Care (13 to 8) fell back, and Technology stayed at 8.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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