It’s feeling a little like Groundhog Day for semiconductor stocks lately, as the nearly 3% decline in the Philadelphia Semiconductor Index (SOX) has the index on pace for a sixth straight down day, a stretch in which it has fallen more than 10%. Since the SOX’s inception in 1994, this current rut would mark the 40th time that the index had a losing streak of at least six trading days. If you want a silver lining, consider that only 15 of the prior 39 streaks lasted a seventh day, so there’s a greater than 60% chance that the group finishes higher tomorrow. Fingers crossed. The longest losing streak for the SOX was nine trading days, and that happened twice: once in July 1996 and then again in 2006.

The chart below shows each of the prior six-day losing streaks on a long-term chart of the SOX. The current streak is the first since May 2025, or a little less than a year and a half ago. One aspect of the chart that stands out is how much less frequent streaks of the current length have become. In the 14 years from the SOX’s inception through 2008, there were 25 streaks of at least six down days in a row. In the 18 years since then, there have only been 15. That’s what you would call a maturing market.

As investors and traders we can try to read into these types of streaks as a sign of impending doom, or an impending bounce back, but the reality is that forward returns after six down days in a row for the SOX are roughly in line with the average for all periods since 1994. As shown in the chart below, median returns following the 39 prior six-day losing streaks were above the long-term average for all periods since 1994 over the following one, three, and 12 months, but below the average for the long-term over the next six months.

The incessant decline of semiconductor stocks over the last several trading days has been a pain to deal with, but markets go up and down, and we didn’t hear many complaints over the last year when it seemed like semis did nothing but go up.

As we discussed in an earlier post, large-caps have been outperforming small-caps recently.  As shown below, year to date it is the Nasdaq 100 that has rallied the most, up over 20%. Up until recently, small-caps and micro-caps were in the lead, but they’ve both been fading since the summer as large-caps have continued to push higher.

Coming into today, small-caps were trading well below their 50-DMAs in oversold territory, while large-caps were trading well above their 50-DMAs in overbought territory.  As shown below, it’s rare to see such a wide divergence in these measures.

In fact, the spread between 50-DMAs for the S&P 500 versus the Russell 2,000 and the Nasdaq 100 versus the Russell 2,000 are in the 99th and 98th percentile of readings, respectively.

Based on speculator positioning, investor sentiment towards large-caps and small-caps is disconnected as well.  In last night’s Closer, we recapped the latest positioning data from the CFTC’s Commitments of Traders report.  We typically express this data as the net share of open interest that is long or short in various futures contracts. As shown below, positioning for small caps has gotten overwhelmingly net short at -20%; the lowest since August 2025.  Meanwhile, the Nasdaq has seen a surge in long bets as net positioning just reached its most optimistic levels since July 2020.

Taking the standard deviations of these readings and comparing large caps (the S&P 500 and Nasdaq 100) to small caps (the Russell 2,000), current spreads are historically wide.  The S&P 500 versus the Russell is just off of peak readings from early September, but nonetheless, sits in the top quartile of readings over the history of the CFTC data. The Nasdaq, on the other hand, indicates the highest share of long bets relative to small caps in almost a decade (April 2017).

This morning, the NFIB published its latest small business sentiment readings. The overall optimism index disappointed, falling to 97.9, slightly weaker than the expected reading of 98.0. One key item from the September report was a big shift in the most important problem reported by small businesses. As shown in the table below, the share of firms reporting inflation and quality of labor as their biggest problems surged (both were top-decile monthly gains). Taxes and poor sales ranked as the most pressing issues for the next-largest share of firms.

The largest share of businesses cited quality of labor as their biggest issue in September. That index rose to 26, up three points month over month, leaving it just shy of the recent high of 27 hit two months ago. That earlier high came on a much larger eight-point monthly jump. Even so, the index currently sits in the 97th percentile of readings going back to 1986, and the September gain likewise ranks in the top decile.

Although that suggests small businesses are struggling to find quality workers, cost of labor no longer seems to be a prevalent issue. That index has collapsed a cumulative eight points since its all-time high in May. Now at 6, it is at the lowest level since December 2020.

Behind labor concerns, government-related categories have historically accounted for a large share of responses for the most important problems. On a combined basis, respondents pointing to regulation or taxes as their biggest issues experienced a huge decline in September, with a five-point drop in taxes and a two-point drop in regulation. That cumulative seven-point decline was the largest single-month drop for these two categories since July 2013 and brought the reading to new multi-year lows.

Of course, large declines in one set of problems mean the share must rise elsewhere. In September, poor sales and inflation picked up the difference. Poor sales rose only one percentage point to 11. While that wasn’t the largest monthly gain, and the level remains below its historical median, it is tied for the highest print since February 2021.

Inflation is not being reported as the largest problem at anywhere near the rate it was in 2021/2022; however, current readings remain historically elevated and are once again climbing. Additionally, the four-percentage-point increase in September was the largest monthly gain since July 2024 and ranks in the top decile of monthly moves over the survey’s history.

Consumer Staples made it seven in a row yesterday, recording its longest winning streak since the seven trading days ending on 8/21/24. The sector has gained 5.26% during the streak, bringing it from oversold to overbought territory in short order, and yesterday was its first overbought close since 8/24/26, ending a 33-trading-day stretch without one.

As shown below, winning streaks of this length haven’t been especially common. Since 1990, Consumer Staples has recorded 37 prior streaks lasting seven or more trading days. The longest lasted 13 days in May 1996.

The rally also brings Staples back to a familiar hurdle. After peaking in February, the sector has made a series of lower highs, with rebounds in May and late July stopping short of the prior peaks. Its latest advance has brought it close to the downtrend connecting those highs. Getting above that resistance would be encouraging for investors in the sector, although the sector still has a way to go before it catches its February high.

Historically, performance after winning streaks of seven or more trading days has been mixed in the near term. Staples has averaged a decline of 0.18% over the next week and a gain of 0.53% over the next month, with positive returns less than half the time at both intervals. Longer-term results have been more positive. Six months out, the sector averaged a gain of 4.89%, with gains 73% of the time. One year out, the average gain is 9.80%, with positive returns 83.8% of the time. For now, the immediate test is whether this rally can carry Staples above the downtrend that has capped its rebounds since February.

You can find more sector research like this in Bespoke’s Daily Sector Snapshot.

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There’s been a big divergence between large-caps and small-caps lately.  As shown below, large-cap index ETFs entered today trading in “overbought” territory, solidly above their 50-DMAs.  Small-caps and micro-caps, however, have been moving lower and entered today at “oversold” levels. And just as you would expect given where large and small caps are, mid caps are right in the middle in neutral territory!

September was a horrible month for the “average” stock even though the cap-weighted S&P 500 held up fine on the back of mega-caps and big AI infrastructure stocks like the semis.

In the last week or so, however, we’ve finally seen “average” start to do better than average, while areas like the semis have gotten hit.  The price charts below for the semis ETF (SOXX) and the S&P 500 Equal Weight ETF (RSP) highlight this recent rotation.

The biggest and most well-known consumer stocks also had a rough September as interest rates and oil prices rose sharply.  These stocks have also bounced back a bit in the last week, as shown in the snapshot from our Trend Analyzer tool below:

“Big software” is another area that has quietly been doing very well in recent months.  Below are price charts for six of the most well-known stocks in the Software ETF (IGV).  You’d be hard-pressed to find better-looking charts right now outside of the Energy sector.

In the first half of 2026, software was treated like a dead industry group because of the perceived threat of obsolescence from AI.  As we said at the time, while some software stocks will likely fall victim to AI, others will adapt and largely benefit from AI implementation.  Recent price action for names like Salesforce (CRM), ServiceNow (NOW), and Atlassian (TEAM) shows how quickly narratives can change: