[10/21 US Stock Morning Weather] 10/20 (Tue) ⛅ → 10/21 (Wed) ⛅? | Why defense and factory stocks were bought on a day when tech stocks stalled
Today’s Summary
On Tuesday, 10/20, the Dow and small-cap stocks rose, fueled by lower oil prices and strong earnings, while tech stocks stalled. However, trading volume was thin, and despite many people being fearful, price movements were calm, so there is no need to panic. For Wednesday, 10/21, I want to calmly watch whether the S&P 500 can reclaim the 25-day moving average around 7,720.
1. 🌙 10/20 (Tue) US Market Weather | ⛅ Cloudy
The average of the four major indices used to determine the weather (S&P 500, NASDAQ, FANG+, and Russell 2000) was +0.29%.
These are indicators showing market tension and investor sentiment (VIX is the closing price for 10/20 (Tue), Fear & Greed is the latest value).
VIX (Volatility Index) 17.31. The previous business day was 18.44 (-6.13%).
Fear & Greed (Investor Sentiment) 23 (Extreme Fear). The previous business day was 23 (±0pt).
Featured News
(1) On 10/20, driven by earnings expectations, the Dow rose $529.85 (+1.02%) to close at 52,495.88. The S&P 500 was +0.28% at 7,712.57, and the Nasdaq Composite was nearly flat at -0.02% at 26,424.82. 3M rose over 5% due to better-than-expected earnings and an upward revision to its full-year guidance, pushing the Dow higher. [Report]
https://www.cnbc.com/2026/10/19/stock-market-today-live-updates.html
(2) Anxiety over AI investment has intensified again. South Korean data center company Elice plunged over 30% on its first day of listing, and the Kospi fell about 3.5%. Following this, AI-related stocks such as SOX, CRWV, and NBIS were sold off before the opening bell. Semiconductor stocks had just stopped a 9-day losing streak, and caution in the credit market regarding the excessive debt of AI-related companies continues. [Report]
https://investrade.com/mid-morning-look-october-20-2026/
2. 🗺️ Sector Trends | Weather Map by Industry
Capital is moving out of semiconductors and software and into specialty retail, medical devices, banks, and defense. However, the 20-day performance of small-cap stocks and consumer discretionary is lagging, suggesting cautious selection based on earnings rather than aggressive sector rotation.
Position of each industry (Relative to SPY 5-day/20-day)
🥇 Leading
Specialty Retail +5.15%/+5.38%, Medical Devices +4.15%/+4.33%, and 2 others
📈 Improving (Signs of capital inflow) Biotechnology +5.54%/-4.77%, Home Construction +4.32%/-3.52%, and 4 others
📉 Stalling (Signs of capital outflow) Software -2.5%/+0.73%
💤 Lagging
Gold (Gold Mining Stocks) -0.16%/-11.43%, Oil & Gas Equipment/Services -0.28%/-2.01%, and 3 others
Risk appetite is XLY-XLP (20-day) -3.25% (leaning risk-off) / IWM-SPY (20-day) -3.42% (small-cap underperformance).
Industries with Momentum (Momentum Score)
This is a score from 0 to 100 based on price momentum and trends (the higher the score, the better the industry’s flow).
It aggregates price movements over the past 3 to 12 months and is not suitable as a guide for short-term trading of a few days to a few weeks.
The top performers are energy and biotech, but momentum in semiconductors is weakening.
3. 🌡️ Market Temperature | 21°C 🙂 Comfortable
I have set market overheating as ‘temperature’ (calculated from indicators as of the 10/20 (Tue) close and the latest Fear & Greed value).
The guide is 🔥 35°C~ Very Overheated / 🌡️ 30-34°C Slightly Overheated / 🙂 20-29°C Comfortable / 🥶 10-19°C Slightly Cold / ❄️ ~9°C Very Cold.
The breakdown is F&G 23 / RSI 49, 43 / 50-day moving average deviation +0.1% / 52-week position 93%.
4. 🌬️ Wind Direction | Slightly Tailwind ↗️
We use “wind” to represent the external environment that tends to move stock prices (values are the change from 10/20 (Tue)).
🌬️ Tailwinds are 10-year Treasury -2bp, crude oil -5.29%, VIX -6.13%.
🌪️ Headwinds are risk appetite -3.25% (defensive is dominant).
Policy rate pricing (based on Fed Funds futures)
There is almost no change from 10/19 (Mon).
5. 🧭 Market Cycle (Four Seasons) | 🌻 Summer / Earnings-Driven Market
We look at where the market is in its four phases based on the relationship between interest rates and stock prices. We are currently in Rising Interest Rates × Rising Stock Prices, which is an earnings-driven market (confidence level 70%). This is a phase where economic and corporate earnings recovery drives stock prices. Interest rates are rising, but earnings are growing even more. Cyclical sectors such as materials, industrials, energy, and consumer discretionary tend to take center stage.
Interest Rates: Rising (tightening direction) (10-year Treasury yield 3-month +46bp (up), 10-year Treasury yield 1-month +15bp (up), policy rate pricing +79.7bp (hike direction)).
Stock Prices: Uptrend (S&P 500 is above the 200-day moving average, the 200-day moving average is pointing upward (+1.22% in 20 days), S&P 500 3-month return +2.85% (flat), NASDAQ is above the 200-day moving average).
However, materials, industrials, energy, and consumer discretionary, which tend to be the stars in an earnings-driven market, are lagging with an average of -1.05% against SPY over 60 days. The flow of funds does not seem to have caught up with this phase assessment yet.
The four phases cycle in the order of “Financial Market → Earnings-Driven Market → Reverse Financial Market → Reverse Earnings-Driven Market.” The next phase likely to come is Reverse Financial Market.
6. 🔭 10/21 (Wed) Forecast | ⛅ Cloudy
This forecast covers the US market starting on the night of 10/21 (Wed) Japan time.
On 10/20 (Tue), the Dow rose on the back of strong earnings, while tech stocks stalled, leaving many wondering how to approach 10/21 (Wed).
AI judgment is “Wait and See” (on a 5-point scale). This is a situation where you should not force a move and wait for more data to emerge.
On 10/20 (Tue), the S&P 500 saw only a slight gain with volume at about half the average (0.53x), and the mega-tech FANG+ index was also weaker than the broader index. The Put/Call ratio (bearish to bullish ratio) is 0.87, leaning toward caution, and while F&G shows extreme fear, the VIX remains calm in the 17 range. The 10/28 FOMC is pricing in an 83.4% chance of a hold, and October seasonality is only a secondary factor, so like the mechanical judgment, I will watch without deciding on a direction.
Outlook ahead In an earnings-driven market, I expect cyclical stocks with good earnings to support the index for 1-2 weeks, with movement close to flat. However, with the 10-year Treasury yield in the 5% range, if the S&P 500 breaks below the 9/16 low of 7,551, I would like to revise my view.
10/21 (Wed) Focus Recommended candidates: Aerospace/Defense, Finance/Banking. The strength of orders has been confirmed by upward revisions from RTX and GE Aerospace, and there are signs of capital inflows into banks as well. There is also a risk of a pullback if rate hike expectations strengthen or credit concerns resurface ahead of the FOMC.
The point to watch on 10/21 (Wed) is “whether the S&P 500 can recover the 25-day moving average (around 7,720).”
Upcoming Important Events
Events in the next few days from 10/21 (Wed) that are likely to move the market.
・10/21 Meta Platforms, Tesla, IBM, Texas Instruments, Lam Research earnings announcements (after close)
・10/21 Philip Morris, Thermo Fisher, Abbott, AT&T earnings announcements (before open)
・10/22 Procter & Gamble earnings announcement (before open)
🗓 Seasonality Memo (Trends for the same month in the past) October: A month with many memories of sharp declines, but it is also a “graveyard for bear markets” where it is easy to bottom out and reverse. It does not apply every year.
※This information is provided based on automatically generated data. It is not a recommendation to buy or sell, and please make your final decision yourself.
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