Last Friday’s Pulse went into further detail about the recent upside action for small caps as the area has rallied substantially off of 2025 lows. Without rehashing the entire piece, the move has certainly been constructive with RUT moving back into a positive trend on its default chart… but an astute analyst then asks the question: what next? After all, small caps can move around quite quickly, so before deploying cash on the trend break, some digging should be done.

In most cases, said “digging” for the analyst team involves looking underneath the hood at underlying participation. For the uninitiated, “participation” defines what percentage of a specific universe exhibits traits we desire. In most cases (including today’s) we will look at some combination of ten week, (measures percentage of stocks trading above ~50-day MA, near-term) bullish percent (measures percentage of stocks trading on a PnF buy signal, intermediate term) and the positive trend (measures percentage of stocks trading in a long-term positive trend, long-term.) High participation is typically a good thing as markets move higher, while lower values with otherwise significant upside action can signal a rather narrow/concentrated subset of the universe driving action up. It goes without saying the latter can be a somewhat dangerous market environment to be buying into.

Today’s pulse will dive deeper into the dispersion of readings for ^BPSCAP & ^BPLCAP, which measure the respective percentage of small & large cap stocks listed on the platform that trade on a Point & Figure buy signal. ^BPLCAP trades at 68% as of 5/12, signaling nearly 7 of every ten large cap stocks are on a buy signal. On the contrary, ^BPSCAP sits at a chart reading of just 24%, meaning roughly 1/4th of small caps trade on a buy signal. Said plainly, participation in the small cap space has been somewhat lackluster, even with the productive move off the localized bottom. This spread is roughly the largest in our indicator history dating back to 2001. This spread may change after today’s market move, but the dispersion between large and small caps is still clear.

While long-term performance metrics for both RUT and SPX following such participation spreads are somewhat in line with historical averages, they have clustered around some interesting market environments. The table below breaks down these dates (excluding clusters) in more detail. As mentioned before, longer-term performance metrics are typically somewhat average, but more near-intermediate term performance showings are relatively poor for both RUT & SPX. All this to say, continue to exercise caution across markets, especially small caps. Participation is key when it comes to sustained bull markets, and a lack of said upside is a yellow frag on the horizon, even with the nice trend break for RUT.

Over the weekend, the Nasdaq Dorsey Wright team released a brand new addition to our website, designed to enhance the way you interact with our research on a day-to-day basis. The new landing state (the Research Hub) brings together a new look and feel to your Nasdaq Dorsey Wright workstation, while still delivering the same quality research content straight from the desk of the analyst team each and every day. With the change effective May 12th, the team wanted to take the opportunity to formally introduce the page with today’s featured article.

To start, we want to emphasize the team hasn’t taken away access to any of the different parts of the platform you know and love. Navigating around the platform (including to the traditional, full view of the daily equity report) all still takes place around the left rail navigation pop-out. (For example, getting to the DALI rankings is still just two clicks away…). Searching for stocks, mutual funds, and research still flows through the upper right-hand corner. 

The meat and potatoes of the Research Hub is designed to make searching for research and ideas relevant to you easy, saving you time in your day. The top of the page brings high level views of pages around the platform. From the Daily Morning Update to a quick summary of what analyst research is trending around the platform, engaging with fresh content on what the analyst team is seeing is still a centerpiece of the platform. At the same time, new panels highlighting NDW’s buylists or featured models makes quick and easy idea generation exactly that… quick and easy for your upcoming client meetings. 

Further down the page drills deeper into specific asset classes in more detail. Based on the DALI rankings, the tile-based navigation system gives you a high-level look at what areas are gaining/losing relative strength. Building on that idea, clicking on any tile will pop out a side rail highlighting a most recent analyst curated comment for the group, spanning across the investable world. Also, underneath the research tab will be relevant full-length research the NDW team has put together for that specific group, making it easier to consume relevant content without having to search around the report archives for the whole morning. On the right-side pop-out is a detailed list of stocks, ETFs and Mutual Funds (if applicable) that rank well according to NDW’s Technical Attribute/Fund scoring system. The goal is to quickly deliver actionable ideas all on one page. Research and stock/fund ideas for each tab won’t change every day, but the analyst team will update each tile with changes as price action dictates, ensuring that you stay up to date with shifts in relative strength. We also include major research and a full size PnF chart of major indices and indicators on the front page of the research hub as well, designed to, again, save you time by eliminating some navigation requirements to get to your favorite charts around the platform. Analyst commentary can also be found here, helping you interpret market action every step of the way.

Towards the bottom of the page, we also included three pre-made screens, all of which utilize the new Screener tool (beta version) to deliver actionable ideas at the click of the button. Ranging from dividend payers to actionable stocks across NDW’s overweight sectors, the analyst team will occasionally update the available screens to help you with easy idea generation.

While the entire team is confident that the research hub will enhance the way you use Dorsey Wright within your practice, we do understand that change can be difficult. Most importantly, we want to reemphasize that your access to different parts of the platform, nor your ultimate cost of the service has changed with the release of research hub. Just like elsewhere on the platform, the team is constantly looking for ways to improve our service to you. If you have any questions, we would like to point you to a recording of our live webinar covering some changes in more detail, linked here. 

Bulls returned to equity markets in force on Monday after positive developments in trade negotiations between the US and China. US Treasury Secretary Scott Bessent announced Sunday evening eastern time that the US and China had reached an agreement to suspend reciprocal tariffs for 90 days following productive talks between the two nations in Geneva (source: cnbc.com). This brings tariffs down to a 10% baseline from each country, with an additional 20% tariff imposed from the US on Chinese goods relating to fentanyl, bringing the total US tariffs on China to 30%. Still, this is substantially less than the 125% level that had been reached due to escalating tensions after the beginning of April.

Investors cheered the news Monday, leading to major improvement for most US indices. The S&P 500 (SPX), Nasdaq-100 (NDX), and Russell 2000 (RUT) each gained more than 3% intraday. Semiconductors doubled that gain, as the VanEck Semiconductors ETF (SMH) climbed over 10%. Chinese equities also saw sharp upside action, as the growth-oriented KraneShares CSI China Internet ETF (KWEB) advanced nearly 6%. On the other hand, safe haven assets plunged, with the SPDR Gold Trust (GLD) dropping about 3%. Today, we will review the current technical pictures from some of these representatives to better understand where things stand as risk-on trades intensify.

Domestic Equities

Domestic equities soared broadly on Monday, with all major representatives across the various size and style classifications gaining at least 2% for the day. Consumer discretionary led the way to the upside for US sectors, as (XLY) climbed 5%, followed by a 4.6% gain for technology (XLK). Utilities (XLU) were the only broad sector representatives to post losses Monday, which is not surprising given their typically defensive tilt.

This improvement led the default chart of the S&P 500 SPX to 5800, its highest level since March. Monday’s high water mark of 5845.37 officially notched a 20% rally from the April 7 lows of 4835.04. The chart returned to a buy signal at the end of April and pushed through further resistance from March/early-April Monday. We have also seen the default chart maintain a positive trend throughout the recent volatility, as it came within a few boxes of testing that trendline in April before turning back around. From here, the only overhead resistance seen is at the all-time highs from the beginning of this year at 6100. The index is not in overbought territory, with a weekly overbought/oversold (OBOS) reading of about 36% at the time of this writing Monday. The chart is up on a stem though, with initial support not seen until 5150. It would not be surprising to see a pullback toward the middle of its current trading band near 5500 given the magnitude of the recent move. Still, the long-term technical picture remains favorable, and the near-term picture has shown more consistent improvement.

Chinese Equities

Chinese equities also saw strong rallies across the board after the 90-day pause was announced. The broad MCHI climbed over 3% intraday and is now testing its negative trendline that was initiated in April. More focused areas like the KraneShares CSI China Internet ETF KWEB saw sharper intraday moves of more than 5%. This fund has experienced some interesting movement over the past several months. It reached a multi-year higher at $39 back in October after the Chinese government announced large-scale stimulus measures. We then saw the fund experience increased volatility over the next few months, but it stayed well north of the pre-stimulus range in the mid-$20s. The beginning of 2025 saw consistent improvement with AI-related tailwinds that failed to push to the October 2024 level, only to have the fund turn back around when tariffs were announced. Again, the decline marked a higher low for the fourth consecutive time since early 2024, and we now see KWEB pushing back toward a test of its trendline in the mid-$30s. The current technical picture is mixed as KWEB carries a 3.48 fund score (prior to Monday’s move), but the recent improvement should be taken as a firm positive. Notable overhead resistance can be seen from $35.50 to $38.50, with additional resistance expected at the October 2024 highs of $39. Initial support can be seen on the default chart at $30 and $28.

Gold

Gold was one of the few assets to show downside action on Monday, with the SPDR Gold Trust GLD shedding about 2.8% to notch its largest daily decline since November 2024. The 1% trend chart of GLD is especially helpful in identifying important technical levels. This chart still looks at only the price action of GLD, but each box is kept to a 1% move rather than a defined point value. This can help smooth out the action over time to create a more consistent technical picture.

The 1% trend chart for GLD shows a double top formation around $315 that serves as the all-time chart high last reached on April 21. The chart has since turned lower, getting close to a double bottom formation if it drops to $296. We have seen GLD give three consecutive buy signals with steady improvement since breaking out of a consolidation range at the end of 2024. The fund was also overbought prior to the most recent reversal, with a weekly OBOS reading north of 100% for two consecutive weeks in mid-April. It is rare to see Gold get that extended, so consolidation is not surprising. Key support from here to monitor sits at around $296, while the fund would give its first sell signal of the year with a potential move to $293. From there, further support can be seen near $273 and $263.

Daily Option Ideas for May 12, 2025