Not long ago, the stock market faced several headwinds that Citadel Securities had flagged for the second half of 2026. Now, the market maker says many of those headwinds have either eased or reversed completely.
Strategist Scott Rubner wrote that "nine of the ten indicators on our checklist have improved materially over the past two weeks." He added, "Our checklist has largely turned green. The remaining question, and now the market's primary debate, is earnings."
The ten metrics fall into four categories: retail trading behavior, technical analysis, market breadth, and earnings fundamentals.
One of the biggest shifts has been in retail trading. Earlier data indicated that retail investors had switched from net buyers to net sellers of stocks. However, Rubner pointed out that retail investors have returned to their role as the most significant structural buyers of U.S. equities. "We have not seen a single net sell day on our retail cash equities platform in July," he added. "As is seasonally typical, retail is deploying more capital than average this month, with average daily net buying running ~3.2x the historical monthly average."
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Rubner also stated that the firm's analysis points to greater market dispersion, with leadership broadening and the S&P 500 rising even as many technology stocks lag.
The return of retail investors as net buyers is a significant shift from earlier in the year when concerns over inflation and Fed policy had dampened sentiment. Their sustained buying support, combined with expanding market participation beyond mega-cap tech, suggests a more resilient foundation for the current rally. Historically, such broadening has been a precursor to sustained advances, but it also raises the bar for earnings to justify valuations.
For Rubner's group, the key uncertainty is whether Q2 earnings can meet lofty expectations. "Consensus now expects 22.4% year-over-year EPS growth for the second quarter - if realized, this would rank among the strongest readings on record outside of major recession recoveries," Rubner said. "Despite lower valuations, earnings expectations have continued to trend higher, a continuation of the pattern we observed ahead of Q1 earnings."
Rubner called the final week of July the "Super Bowl" of Q2 earnings, with several major companies, including four from the Magnificent 7, reporting.
Rubner said chip makers will remain in the spotlight for the entire earnings season because their reports are staggered across multiple weeks. "As a result, earnings risk will remain elevated throughout much of July and August rather than being concentrated into a single week," he said.
The firm's checklist has largely turned green.
Major financial firms like Bank of America have voiced a positive outlook for earnings, yet Rubner said Citadel Securities sees earnings as the final major unresolved issue.
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