EB Daily Market Report - Brief Update - Tuesday, February 24, 2026

There's good news and bad news today. The good news is rather obvious. Stocks are higher. The better good news is that support held once again on the S&P 500 at 6797 and that technology (XLK) has shown a bit of relative strength - nothing extreme and it could be fading, but after downtrending on a relative basis for many weeks, we'll take whatever we can get.

Here's how the XLK has traded recently on both an absolute and relative basis:

The relative bounce earlier this month is obvious, but the red directional line does show that the XLK:$SPX could be rolling back over again. This is something that I'll continue to watch closely. Also, the 20-day EMA is now acting as resistance. In order to move back into what I would consider as sideways consolidation, rather than downtrending, I'd want to see the XLK clear and close above its 20-day EMA.

Now for the bad news.

Not much has changed in terms of our sustainability ratios. Rotation remains bearish. Here's a chart of the S&P 500 and our sustainability ratios, only one of which is gaining any significant ground. In other words, money continues to rotate more towards value-oriented stocks. While that may seem comforting to those seeking wider participation in stocks, the truth of the matter is that this type of relative strength rarely accompanies meaningful rallies in the S&P 500, if you follow history the way we do.

Here's how the S&P 500 and our sustainability ratios look right now:

Those red circles on the sustainability ratios highlight the continuing cautious rotation taking place. Only small cap growth has shown solid behavior vs. small cap value. Unfortunately, that doesn't give me great comfort regarding the direction of the large cap S&P 500.

This is just one piece of the jigsaw puzzle, but it points, in my view, to further difficulty ahead. That doesn't mean bear market, but I'd be really surprised if the S&P 500 suddenly sky rockets past 7000.

I'll keep you posted.

Happy trading!
Tom