So you’ve been riding high on the stock market’s recent rally, and now you’re wondering if the good times are about to hit a speed bump. Well, buckle up—because according to Ned Davis Research, they might be.
The S&P 500 has been on a tear since April, fueled by solid earnings and a temporary chill in US-Iran tensions. But here’s the thing: the index is starting to look a little tired. It’s down less than 1% from its June peak, and traders are taking profits left and right, especially in the semiconductor and memory sectors. The war situation heating back up isn’t helping either.
Before you panic and sell everything, though, here’s the good news: the bull market isn’t dead. It’s just consolidating. Think of it like a boxer catching their breath between rounds.
## The Four Signals You Should Know About
Ned Davis Research’s chief strategist, Ed Clissold, is watching four key signals that paint a picture of where stocks are headed for the rest of 2026. Some are flashing red, some green, and some are just… confusing.
## Signal 1: Historical Patterns (Bearish)
The S&P 500 Cycle Composite—basically a fancy model that looks at how stocks typically behave based on historical patterns—is suggesting weakness ahead. Volatility could stick around through mid-August, with another dip in early October. But here’s the kicker: unless something crazy happens (like, you know, another geopolitical shock), this is a pretty predictable roadmap. The Iran war was the curveball that threw everything off earlier this year.
## Signal 2: Portfolio Allocation (Bullish)
The firm’s Asset Allocation Model is saying “stay overweight stocks.” At the end of June, it recommended 70% in equities—the highest level in four years. That’s a pretty bullish stance, with 25% in bonds and 5% in cash. So the smart money isn’t abandoning ship just yet.
## Signal 3: Momentum and Sentiment (Bearish)
The Fab Five model—which tracks momentum, breadth, sentiment, and monetary conditions—slipped into bearish territory at the end of June. But before you freak out, Clissold notes that most of the individual components are in neutral territory. It’s not exactly screaming “sell everything.”
## Signal 4: Market Breadth (Mixed)
Here’s where it gets interesting. Market breadth hit a record high in early July, which historically can signal a peak. But most industries in the S&P 500 are still in an uptrend, and over 70% of sub-industries are trending higher. That’s actually pretty solid.
## The Bottom Line
A rocky summer followed by a year-end rally? That’s the plausible scenario here. The market’s consolidating after a monthslong run, and some volatility is totally normal. The S&P 500 is still about 8% above its 200-day moving average, which means the uptrend is intact.
So yes, expect some turbulence. But the long-term picture? Still bullish. Just don’t be shocked if your portfolio takes a dip before things get better.
