Monday’s push higher within US Equities brought notable increases for participation indicators and changes for DALI. The bullish percent for the S&P 500 (^BPSPX) rose above the 70% level and the positive trend indicator for SPX (^PTSPX) witnessed its sixth largest one-day increase, moving up 8% to 58%. Indicating that roughly 6 out of every 10 stocks within SPX maintain a buy signal and a positive trend on their point and figure charts.

Within NDW’s DALI Rankings, the positive day for equities drove Domestic Equities back above Commodities to the top position within DALI (discussed more in the feature below). On the sector level of DALI, Technology overtook Consumer Cyclical and rose to 5^th after a brief period in the lower half of the rankings. Within the past two weeks, Technology has garnered over 30+ tally (or buy) signals with most of those coming from Consumer Non-Cyclical and Energy. The abrupt rise for Technology from a relative strength standpoint has been primarily driven by improvement within Semiconductors, but leadership within the sector continues to reside within the Internet and Software industries (among the NDW 40 Industry groups).

The rally within Technology has pushed short-term indicators like the 10-week (measuring the percent of stocks trading above 50-day MA) and weekly momentum (measuring the percent of stocks with positive weekly momentum) to or near highs. The 10-week for Technology stocks (^TWECTECH) increased more than 13% after Monday’s trading to 72% and marked the second largest one-day increase in the indicator’s history (largest one-day increase was 11/10/2022) beginning in September 2014. This suggests that more than 7 out of 10 stocks within the Technology sector trading above their 50-day moving average. Meanwhile, the percent positive for weekly momentum indicator for Technology (^MOECTECH) moved to 92% following Monday’s action to mark its highest chart level in five years.

Bearing in mind the high levels of short-term technology indicators the graph below breaks down the current length of time that stocks within the sector have maintained positive weekly momentum. Historically momentums have remained positive (or negative) for roughly 6 to 8 weeks on average. As of Monday’s close, more than 70% of the stocks within technology have maintained positive weekly momentum for a month or less, indicating some stocks still may have potential for upside. On the flip side, over 15% of the stocks within the sector have maintained positive weekly momentum for six weeks or more. Short to intermediate-term positions that maintain weekly momentum for six weeks or more could be positions that have rallied to extended points on their charts, providing a potential opportunity to lock in a profit or mitigate losses depending on the cost basis.

Domestic equities have sharply headed higher over the last month and have now regained the top spot in the DALI asset class rankings, beating commodities by one signal. In yesterday’s featured article, “Bulls on Parade,” we discussed the run domestic equities have been on since their April low. With that in mind, today we’ll expand to a few other major asset class moves.

 Before we move on from domestic equities, there is one area to continue to watch moving forward, mega caps. For better or worse, these are the names that make up a sizeable portion of the exposure in equity benchmarks like the S&P 500 (SPX). Their strength or weakness drives broader market returns in this environment. A good representative of the mega caps is the Invesco S&P 500 Top 50 ETF (XLG). XLG broke a triple top to return to a point and figure buy signal in late April after getting close to its bullish support line earlier in the month. It is now one box away from testing old support at $49 where the downside movement started for mega caps in late February. So, the mega caps have retraced almost all their downside movement from their initial breakdown. The next level of resistance is at all-time highs at $51. A failure up here would set up a long-term head-and-shoulders pattern. While this isn’t a traditional point and figure pattern, it shouldn’t be ignored if it comes to fruition. XLG has held an acceptable fund score since March 2023, so it would be prudent to watch out for any drops below the 3.0 threshold moving forward.

One key market barometer that has not retraced its downside move is the US Dollar (DX/Y). The US Dollar still trades on three consecutive sell signals and is in a negative trend. While it has reversed back into Xs in May, DX/Y is trading near multi-year lows in the low 100s whereas it peaked earlier this year at 110, its highest level since 2022. With the US Dollar's current technical weakness, there is still a favorable back drop for international equities and other asset classes that benefit from a declining USD. Secondly, the weakness in the USD correlated with weakness in US equities and while it’s not a one-for-one relationship, it’s something to keep in mind moving forward.

Lastly, yields moved higher in May while most of the recent rally saw rates and domestic equities inversely correlated. With positive inflation data coming in Tuesday morning, interest rates still headed higher with two Fed cuts priced in for later this year. The US Treasury 10YR Yield Index (TNX) is nearing 4.5%, which has spelled issues for domestic equites over the past few years. Intermediate- and long-duration bonds remain areas of weakness that should be avoided despite TNX struggling to stay above 4.5% for an extended period. Short-duration bonds still offer similar yields with less volatility, thus making them more attractive at this time. Overall, the recent rally in domestic equities is encouraging following the sharp downside action earlier this year. However, other asset classes are still showing signs of caution or at least that a return to pre-March market conditions have yet to materialize. Domestic equities have regained the top spot in the DALI rankings, but the broad asset classes are more bungled together than they were entering the year, so there could be more shifts to come.

Daily Option Ideas for May 13, 2025