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This Week on Wall Street
Week of August 3, 2026
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Market Commentary
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The week opens with a negotiation rather than a strike. Talks between Washington and Tehran begin Monday afternoon, and what markets want out of them is narrow and specific: a durable reopening of the Strait of Hormuz. Oil is already pricing some of it in, with Brent and West Texas Intermediate each giving back roughly 5% or more this morning after a July advance that ran better than 20% for both benchmarks. Equities are higher as well, led by technology and small caps. Whether that discount holds is an open question, since the strait has closed and partially reopened more than once this year.
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The morning also brought a strong read on the factory economy. July’s ISM manufacturing survey came in at 55.6 against a 54.0 consensus, up from 53.3 in June and the best reading since May 2022. The internals are the encouraging part. Production jumped to 58.5 from 52.2, new orders edged up to 56.7 for a seventh straight month of expansion, and order backlogs built to 55.0, which points to demand running ahead of what plants are currently turning out. The employment index moved back above the expansion line at 52.8. Manufacturing was still contracting as recently as last year, so a pickup this broad speaks to the shape of the expansion rather than to one strong month. It also puts a firmer floor under the industrial and cyclical corners of the market heading into the rest of the quarter.
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That mix lands on the heaviest week of labor data since the spring. Job openings arrive Tuesday, the ADP private payroll estimate Wednesday, and the July employment report Friday. Consensus looks for payrolls in the 80,000 to 90,000 range after June’s 57,000, with the unemployment rate holding near 4.2% and average hourly earnings up about 0.3% on the month. The headline count will draw the attention, but the wage line carries more weight this time. Three policymakers voted to raise rates at last week’s meeting, and futures pricing now puts the odds of a September increase at roughly two in three. A firm earnings figure would harden that case and keep pressure on the long end, where the 30-year yield already sits at its highest level since 2007. A softer one would give the bond market room to back off and ease the strain on the most rate-sensitive corners of the market. Both paths are open going into Friday.
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Beneath the data, the shift worth understanding is that momentum has handed the lead to something else. Momentum is among the most durable factors in market history: buying what has already been working has beaten the broad market over long stretches, which is why so much capital ends up crowded into it. It is simply not the factor in front right now. Momentum peaked in late June and has been on the back foot since, giving back a good deal of its spring advance in a short run of busy sessions. A move that quick is rarely a verdict on earnings or the economy. It is a statement about positioning. When the same names are held by the same people for the same reasons, the exit is narrow, and crowded positioning tends to unwind faster than it was built. What replaced it is the more useful part of the picture. The average stock held its ground while the leaders stepped back, and the equal-weight version of the S&P 500 set a record high in late July. That is the signature of a rotation rather than a retreat: money moving down the cap scale and across sectors instead of leaving equities altogether. Leadership changing hands is a normal feature of long advances, and it can feel unsettling while it happens, because the index can look flat while a great deal shifts underneath it. Whether the broadening keeps carrying the market, or momentum steps back to the front, is what we will be watching into August.
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Chart of the Week
What History Says Happens After a Momentum Rally
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Goldman Sachs gathered the eleven times since 1980 that the long/short momentum factor gained more than 20% over three months, then tracked the path afterward. The average episode, in navy, gives its gains back near the three-month mark before recovering over the following quarter. The current episode, in blue, ran hotter than average into the peak and then fell further and faster, closing July near the low end of the historical range without breaking out of it. The grey band widens sharply past month four, which is the honest part of the picture: the range of historical outcomes from here is wide.
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On the Calendar
Economic Releases This Week
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Monday ISM Manufacturing PMI
Tuesday JOLTS Job Openings
Wednesday ADP Employment, ISM Services PMI
Thursday Initial Jobless Claims
Friday Jobs Report (Nonfarm Payrolls, Unemployment Rate)
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Worth Reading
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 |
| Large Cap | ▬ | 13 | 10 |
| Foreign Developed | ▬ | 12 | 15 |
| Small Cap | ▬ | 10 | 14 |
| Emerging Markets | ▬ | 10 | 13 |
| Mid Cap | ▼ | 8 | 14 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| Floating Rate Bond | ▬ | 11 | 11 |
| Short Term Bond | ▬ | 10 | 7 |
| High Yield Bond | ▬ | 10 | 6 |
| Long-Term Bond | ▼ | 7 | 7 |
| Intermediate Term Bond | ▼ | 6 | 6 |
| Corporate Bond | ▼ | 6 | 5 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Financials | ▲ | 14 | 10 |
| Consumer Cyclical | ▬ | 13 | 3 |
| Health Care | ▬ | 12 | 13 |
| Technology | ▬ | 12 | 8 |
| Real Estate | ▬ | 11 | 11 |
| Energy | ▬ | 11 | 6 |
| Industrials | ▬ | 10 | 13 |
| Consumer Defensive | ▬ | 10 | 9 |
| Utilities | ▼ | 6 | 14 |
| Communications | ▼ | 6 | 2 |
| Materials | ▼ | 5 | 9 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Mid-Cap Value | ▬ | 13 | 13 |
| Large Growth | ▬ | 12 | 8 |
| Small Growth | ▬ | 11 | 14 |
| Mid-Cap Growth | ▬ | 11 | 13 |
| Small Value | ▬ | 11 | 12 |
| Large Value | ▬ | 11 | 9 |
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Notable Newton Moves This Week: The tables shifted toward the parts of the market that have been picking up the slack. Consumer Cyclical made the largest jump of the week, climbing from 3 to 13, while Financials rose from 10 to 14 to become the only strong read across all four tables. Energy improved from 6 to 11 and Technology recovered from 8 to 12, lifting both out of declining territory. The other side was the fade in last week’s leaders. Utilities fell from 14 to 6 and Mid Cap slid from 14 to 8, both dropping two full buckets, with Small Growth, Small Cap, and Foreign Developed also easing out of strong readings into neutral. The net effect is a broadly neutral picture with leadership changing hands rather than a uniform move in either direction.
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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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