Major Index's Record-Breaking Run Has Just Ended

The Russell 2000’s record streak of 14 consecutive days of outperforming the S&P 500 finally ended on Friday. Stocks underwent a reset after a week of massive rotation and increased volatility.

The Magnificent Seven, which has been an under-performer so far in 2026, was the star of the day with a gain of 1%. The rest of the market struggled with just 33% of stocks managing gains. New 12-month highs were cut in half to about 265 names.

Why This Reversal Is Routine

This reverse rotation has been a common experience for the past year whenever the small caps have a streak of outperformance. What was different this time was the length and magnitude of the small-cap leadership. The Russell 2000 is up about 7.5% so far in 2026 versus a gain of less than 1% for the S&P 500 (SPY)  and 0.5% for the Magnificent Seven (MAGS) . This was the best relative performance by the little guys in many years.

Part of the reason this outperformance cooled off on Friday was that technical conditions were becoming extreme, but the main reason is that the big-cap technology stocks start to announce earnings next week. There is a good likelihood that the reports will be solid. Expectations have come down substantially since the Magnificent Seven topped back at the end of October. It won’t take massive revenue and EPS beats to attract buyers.

Looking Ahead to Earnings Season

Of course, the usual bears will argue that this reverse rotational action is a sign of a market top, but there isn’t hard evidence to support that view. This is just a healthy reset after an active week. A pullback, consolidation and some reverse rotation are what is needed to set the stage for further upside.

A few of my stocks took some hits on Friday, but at this point, it just looks like routine volatility to me. I am stalking some pullbacks for entry in anticipation of good earnings reports in the next few weeks. I remain focused on individual stock picking and am unconcerned about the indices.

Have a great weekend. I’ll see you on Monday.

At the time of publication, DePorre had no positions in any securities mentioned.