The recent rally has been led higher mostly by those areas of the market that accelerated lower throughout April. Growth focused areas have perked up quite nicely as the core of the market has showed some resiliency. The analyst team is typically quite interested in the relationship between cap & equal weighted assets. After all, knowing whether the “generals” or “soldiers” are in control can provide valuable insight into what areas might be strong at any point in time. If cap weight options are strong, then perhaps a prudent investment manager should focus on the more established names within a given sector. If the opposite is true, it might make more sense to spread the love across a host of different options rather than just a select few.

Starting broadly, we can focus on a key relative strength chart between SPX and SPXEWI. The chart below details the recent reversal back into X’s favoring SPX on a 1% chart, signaling a near-term preference for cap weighted names coming off of 2025 lows. In layman’s terms, this reversal computes to roughly 3% outperformance of cap-weighed SPX over equal weighted SPXEWI, and gives some general direction on what areas of the market have led the way to the upside. While more sensitive than our traditional 3.25% or 6.5% charts (due to the similar performance traits between the two indices) the 1% chart is consistent in its overall action. An investor who follows either a signal or column switching strategy (owning whichever asset is on a buy signal or column of X’s, respectively) between the two options bests a simple buy and hold portfolio of either asset on its own since the early 1990’s.

Drilling down further, we can compare tradeable representatives across each of the major sectors you may look towards in your portfolio. The table below breaks down the overall fund scores for said funds, highlighting those options with fund scores above NDW’s technically acceptable 3.0 threshold. Somewhat conversationally interesting is the rather uniform agreement across the sectors between their cap weighted and equal weighted counterparts. Said otherwise, there is no observed sector where the cap weighted option scores above 3.0 and the equal weighed option scores below, or vice versa. Notable cap weight standout Financials XLF outscores RSPF by nearly 1.50 points on our fund scoring system. On the other hand, equal weight Utilities RSPU bests XLU by roughly 1.25 points as of 5/15. All this to say, using the fund scoring system can help provide some color as to what areas of the market are showing strength underneath the hood, and whether it makes sense to pinpoint cap weighted strength or deploy more of a shotgun spray approach with equal weighted exposure in your allocation.

While the week kicked off with Domestic Equities moving back to the top spot within NDW’s DALI Asset Class Rankings, one asset class has continued to see improvement throughout the week. International Equities have picked up above 15 tally (or buy) signals since last Friday, with most of those signals coming from weaker asset classes like Currencies and Fixed Income, along with a few from Commodities. But International’s rise in signal count hasn’t just been this week as it is the most improved asset class since the beginning of May and the mid-April market lows. This week’s action places International Equities within 14 buy signals of first place Domestic Equities and marks the closest these three asset classes have ranked to each other in tally (buy) signal count since late 2023. Given International’s near-term improvement in relative strength, today’s piece will drive under the hood to examine where this recent improvement came from and whether there is still potential for more from the asset class.

Under the hood of International Equities within DALI, the rankings have remained stable for the past month, showing that long-term relative strength leadership has been sustained. Europe continues to lead the long-term rankings, sitting atop the DALI International Equity Rankings and 2^nd (out of all 134) groups on the Asset Class Group Scores (ACGS) page.  In the near-term though, Latin America has witnessed improvement. This can be observed on the Asset Class Group Scores page as the group maintains a score of 3.39, nearing its highest in more than 12 months, while being coupled with the highest score direction (2.93) out of all groups (134 groups) within ACGS.

An intriguing relative strength chart worth noting is between the iShares S&P 40 Latin America ETF (ILF) versus the iShares Europe ETF (IEV) on a 3.25% scale. Following Tuesday’s trading, ILF reversed into Xs on the RS chart showing a near-term preference for Latin America over Europe. Bear in mind that the RS chart still maintains an RS sell signal, so long-term, Europe is still favored. Nonetheless, a reversal on the RS chart is the first step and makes Latin America a region to watch moving forward.

But is there potential for upside left for broader Latin America? Interestingly enough, the largest Latin American market, Brazil, presents the weakest technical picture among the countries within the region with the iShares MSCI Brazil ETF (EWZ) maintaining a fund score below 3. The iShares MSCI Mexico ETF (EWW) holds an acceptable fund score north of 3 and rallied earlier this month to its highest chart level since July last year. Maybe somewhat surprising, recent action has driven Peru (EPU), Chile (ECH), and Colombia (GXG) to rally to multi-year highs with this week’s action – with Peru (EPU) moving to highest chart level in roughly 12 years! Each of these funds maintain a fund score north of 4.5 with Chile (ECH) maintaining the highest score within Latin American funds at 5.88. Given the recent run and multi-year highs from some countries, Latin America could see a pullback or consolidation in the coming weeks. Sustaining recent improvement adds another potential region of leadership within the International space.

Given European leadership and recent improvement within Latin America, is there a region of the globe left that may still have potential improvement? Countries within the Asia-Pacific region provide that potential for fodder. But also consider that either weakness from leadership within Domestic Equities or Commodities could be a path for International Equities to move to the top. In the coming weeks, the analyst team will be monitoring whether a narrowing of tally (buy) signals between the top three asset classes continues, potentially leading to an asset class change. Those looking to monitor for potential changes within DALI can do so by clicking on the Set Alerts in the upper right corner of any of the DALI pages.

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