Each week we publish a macro-market Research Report, which has proven best-in-class, at finomgroup.com. Here are some notable excerpts from our recent reports and this Sunday’s publication. In addition, we’ve included a couple of noteworthy charts to build upon our ongoing data and analytics, as we approach the start of 2H 2026.
As a robust and volatile stock market in the first half of 2026 edges closer to commencing the 2nd half of the trading year, we recognize the Q3 Midterm Election year historic trend. Midterm Election years provide an average price path guide that validates the outlook and/or low expectations for price action through the Q3 period:(chart from June 2, 2026).
The Bad News Is Market Structure
Nearly 4 weeks ago, I alerted Finom Group members to the reality that the former market correction in Q1 that had repaired market internals and given way to the renewed uptrend, had once again fractured into disrepair once again. While the history of any market correction greater than -6% has never taken place from the month of June, investors might still remain on alert for such a correction due in-part to the situation with market structure and by way of the NYSE High Low Logic Index.
The High Low Logic Index getting above 1.65% for the first time in 6 months was one of the biggest reasons for forecasting a correction in the first half of 2026, as recognized by the outlined quant below, within our 2026 Outlook report.
The Good News Is Market Breadth/Signal
The NYSE and NYSE Common Stock Only Advance/Decline Lines have both made new all-time highs as of this past week. The NYSE Common Stock Only A/D Line is featured below forsaking redundancy. As the truism goes: Breadth leads price.
The chart recognizes theA/D Line made its first new all-time highsince early April. We’ve been monitoring since then for such an achievement to validate the S&P 500’s all-time highs, also reducing the concerns for a Dotcom-crash signal. With already seeing the NYSE A/D Line at all-time highs and now the Common Stock Only version at all-time highs, the burden of bearish proof for future price action rests with… the bears. Historically, there’s been only one (non-exogenous event like 2020) occurrence in the history of the S&P 500 where the ultimate top occurred with a confirming NYSE A/D Line all-time high. We’re doubtful this will be another historic top, but rather a consistent Buy-the-Dip signal, urging new all-time highs for the S&P 500 as the year progresses, as the table below evidences:
As the table evidences, it would prove extremely rare for the NYSE A/D Line to achieve an all-time high and the S&P 500 to have already topped. The median lead time from the A/D Line high to the S&P 500 ultimate top has been nearly 7 months or 30 weeks. Only 2 times in S&P 500 history has the ultimate top coincided within a week of the A/D Line high, one of those was the exogenous global economic shock of Covid 2020. So unless you’re betting on another pandemic… The S&P 500 is probably very distant from its cycle top. The actionable analysis here informs that investors would prove savvy to buy any and all dips below this past week’s closing value, the date of the NYSE A/D Line all-time high. Notice that the A/D Line for the Dotcom era peaked in 1998, but still found SPX traveling higher for nearly 24 months. We would think the NYSE A/D Line needs to stop making all-time highs before fearing an AI-Bust around the corner.
Over-Earning Indeed
Just to reiterate our case for a period of over-earning, yet not trying to foolishly time the end of an over-earning period, we see the evidence that more and more strategists and analysts are awakening to this fact. As such, please review last week’s notes on the subject matter, alongside the latest update:
“Yes! I’ve gone on record with regards to the probability that the S&P 500 may be “over earnings” as evidenced by the chart of Median Estimated 1–Year Earnings Growth Rate and forward returns annotated below:
This data updates monthly, and at month-end we anticipate the “Sell” signal to trigger. When the Median 1–year EPS Growth Rate rises above 14.2%, historically the forward annualized return is -2.4%. So while there are plenty of headlines suggesting this CAN’T possibly be a 2000-like bubble, we ask investors to consider that bubbles can happen in earnings, not just P/E Ratios via price alone. Secondly, despite popular belief and as evidenced in the chart above, earnings growth was quite strong during the Dotcom bubble, presciently triggering the Sell signal back then. An earnings-led rally should be much more sustainable than a P/E-led one fueled by irrational exuberance. The question these days is whether the quality of earnings is eroding and fueling irrational exuberance in earnings expectations. Might circular financing be artificially boosting earnings among the AI-related companies? Might capital gains on their investments in one another be doing the same? So do I think we have an earnings bubble? I think the S&P 500 is over-earning, and the signal would prove a call to action, not necessarily a market top call. The Dotcom bubble burst not only with the Sell signal triggering in 1999, but also with the P/E Ratio expressing a bubble at year–end 1999 into 2000.”
Looking for Higher Prices In July
As we start the second half of 2026 and the new trading month of July, our primary and big picture quants are a more pressing call to action and matter of focus. Here is definitely where we focus on the Wayne Whaley quant that triggered on April 17, 2026, as the rally and renewed uptrend was in full swing. Before getting into the Wayne Whaley quant, here’s a reminder about Midterm Election years with a negative Q1 return:
What also suggests investors should be looking for higher prices versus meaningfully lower prices, or a correction in the S&P 500, is the following data from Odd Stats:
The S&P 500 remains in a consolidation phase since its June 2nd peak. Based on the data above, this consolidation phase that started in June should not carry itself to a decline of -6% or more into July. Therefore, unless this is the first time in history, the S&P 500 would make a new all-time high in July, before a greater than -6% drop occurs. Could this prove the “first for everything”? Yes. Is that quantitative analysis or speculation? I think you know the answer to that question! With the aforementioned data and analysis, we can quantitatively suggest our case has been clearly evidenced and our suggestion is warranted: be on the lookout 
for higher prices folks.
Something else to think about, reminding ourselves about all-time highs and price action thereafter, regardless of the month:
Only 1 in 58 of all-time highs then goes on to drawdown 10% or greater! Only had 3 drawdowns of at least -10% since end of 2018. Only 1 in every 104 all-time highs turns into a bear market. We’ve already had 4 bear markets in the last 7 years. Mathematically and statistically speaking, we are not overdue for a correction or bear market. If you’re still ignoring the call to action for higher prices 
.
The Power Of Small Wins
While shares of AAPL put a dent in the Golden Capital Portfolio, it was offset by the new all-time high achievement in the Health Care ETF (XLV) holding. Recall we had been suggesting and outlining our affinity for buying the cheaper prices in XLV as long ago as March 8th and as recently as last week, and as prices dropped below $142/share even:
And from within our June 7th macro-market Research Report: “If you bought in March as it corrected, in April as it bottomed and in May as we pounded the table in favor of XLV, you’ve been rewarded with both a real return and dividends. Did you have to deploy capital and wait? Yes! Wait for it, wait for it….. that’s the sound of the worlds smallest violin 
playing for you! Don’t make it complicated folks. Still talking about the cheapest sector in the market across all qualifying valuation metrics (sector valuation table below, click to enlarge image).”
While I had also been taking notice of the sub-industry Biotech (XBI/IBB) recently, as forming a breakout pattern, it proved a good signal for the whole sector. It doesn’t hurt, directly to also have shares of Eli Lilly (LLY) moving to all-time highs as of this past week. LLY is the most heavily weighted stock within the XLV. The two charts below had been offered to Finom Group members on Telegram, evidencing the XBI outperformance relative to SPY (top chart), and breakout on an absolute basis (middle chart). The combined technical analysis, and in conjunction with LLY’s uptrend, have offset even the still yet overheated conditions from the sector (bottom chart):
Mid-Summer Rally Weight of the Evidence
As shown in the table of QQQ monthly returns below and since 2010, every negative monthly June return was met with a positive monthly July return, with an above average monthly July return to boot 
! The defense does not rest on such laurels!
Now, let’s also look at the Mid-Summer rally 12-day period and potential for the Nasdaq 100. Recall the S&P 500 had a 74% positivity rate since 1950. The Nasdaq 100 tells an even stronger story. Since 1986, the index has averaged a +2.8% gain during this period with a 75% hit rate. The years that went negative tend to cluster around identifiable macro shocks — 1986, 2004, 2008 — while positive years are broadly spread across different rate environments and economic cycles.
Notice that the average price path for both indices shows the characteristic shape of this window period: a brief pause right at the start (so far so good 
i.e. Friday), then a grind higher that often extends well beyond the 12-day window itself. The S&P 500 recently bounced off its 50-day moving average for the second consecutive day, breadth has been improving, and now the calendar is adding its own tailwind. The 12-day mid-year window is one of the cleaner seasonal setups in the data. It began on Friday the 26th (Bluekurtic data provided). Set your watch folks!
Problems Are A Feature of Markets Not a Bug 🐞
There’s no such thing as a perfect market or perfect market conditions. For every rally there is something lacking. For every downtrend there is something outperforming in an uptrend. For every negative there is a positive. For every seasonal tailwind there is a seasonal headwind. If the Midterm years demonstrating a greater than average correction (-17.5%), historically isn’t bad enough, the former recognition of fragility within market structure by way of the High Low Logic Index lending a long-term signal also warrants caution. Moreover, and contrasting the Mid-Summer tailwind and July favorable returns on average, correlations are extremely low. This indicates low market dispersion, where investors are “stock-picking” more than passively investing in indices. Stock-picking has a low survivability rate relative to achieving benchmark returns.
The Median 63-Day Correlation of S&P 500 stocks to the S&P 500 Index price itself is at a historically low level, levels that in the past have also been associated with pullbacks, corrections and/or bear market conditions. That’s a wide range of outcomes, indeed, but like the High Low Logic Index, demands some type of price and behavioral remedy from investors. With this understanding, we’re better able to understand what the masses are doing, and possibly even reference “correlations” as a sentiment indicator associated with the 2025 to 2026 market regime. Also importantly, high levels of dispersion and low levels of correlation are often associated with more stock participation in the broader index trend. Sounds like what we know about 2026, indeed.
