Markets have taken a step back over the last week as growth focused areas retreated off of all-time highs. We will open this piece with a reminder that markets cannot go up every day… nor should we expect them to. In fact, pullbacks off of all-time highs are more often than not constructive as markets cool off. Just how brave climbers scaling Mt. Everest have to retreat back to base camps to safely make it to the summit, major markets can move lower and “set up camp” before acclimating and trudging on to new heights. All this to say, regular declines are just that… and are usually nothing to worry about.

To provide more context here, we can look at Nasdaq-100 representative QQQ. Before accelerating higher on 8/22 on the back of dovish commentary from Fed Chair Powell, the fund had put in six straight daily declines. This marked the longest streak since October of 2022. Even with that negative accolade notched, the overall technical picture remains constructive. In fact, despite declining for six straight days, QQQ didn’t even reverse back down into O’s on its default chart. The fund still maintains a strong 5.59 fund score… and the only real “negative” present is the fact that recent action has left it quite extended on its default chart. Despite this, logical pullbacks could come around $550 (the middle of the trading band and just above old resistance from February). Other indicators around the platform still signal a fully risk-on tilt.

Going back to the idea that pullbacks (or even streaks of declines) are more “normal” than you might think, QQQ has seen six days or more of straight declines 34 times since 1993 (including 2025). Historically, returns over the decline (no matter how long) average -4.99%, nearly double the decline than we saw during this week’s exhale. On average, returns bounce back over the next week (as they seem to have done with action on 8/22) and are largely on par with historical averages over wider time frames (+8.11% over the next six months). Furthermore, QQQ has been positive a resounding 29 times, equating to a roughly 88% hit rate over the next six months. Excluding two main detractors (.com bubble and GFC) from the data set, the average six-month return jumps to 11.37%. It can certainly be easy to get wrapped up in the nightly news headlines about prolonged market declines when they occur. More often than not, it isn’t a sign of massive exhales to come.

With the calendar entering the back half of Q3 2025 and earnings beginning to wind down, it is worth taking time to note what changes in relative strength have transpired within the NDW DALI asset and sub-asset class rankings.

Within the broad DALI asset class rankings, domestic equities have picked up 20 tally (or buy) signals in Q3. This extends the lead for U.S. equities to 18 tally signals after overtaking International Equities for the top spot to cap off Q2. U.S. equities have now spent 80% of 2025 ranked as the top asset class within the NDW DALI asset class rankings. Since the beginning of Q3, international equities is the only other asset class besides domestic to see an increase in tally signal count. After jockeying with the top two asset classes for much of Q2, commodities have shed nine tally signals in Q3, residing 19 tally signals behind International. Defensive asset classes like cash, currencies, and fixed income have all seen their tally signal counts decrease since early April. DALI has now favored an offensive posture with both equity asset classes and commodities ranking within the top half (out of six asset classes) since May 2023.

The remainder of the piece will look to highlight developments worth monitoring within U.S. Equity sectors. Large caps and growth continue to maintain a notable lead over their mid-cap, small-cap. blend and value counterparts. European equities and global developed markets sustain high relative strength. For a recent update on International Equities check out the Daily Equity Report from August 18^th. Currency and fixed income rankings have remained unchanged following changes in the latter part of April and early May, which brought developed currencies above the U.S. Dollar and risk-on fixed income back to the top of the asset class’s ranking.

From an improving leadership perspective within U.S. equities, technology has garnered the most attention, grabbing 20 tally signals since the beginning of Q3 and moving to 3^rd within the NDW DALI sector rankings. Although its ranking among the sectors remains the same, basic materials have increased 21 tally signals to be the most improved sector from a relative strength basis in Q3. Basic materials have ranked within the bottom half of the DALI sector rankings since December 2023, but prior to moving into the bottom half, the sector ranked among the top 5 for 13 months, from November 2022 to December 2023. Beyond the two aforementioned sectors, only two others – consumer cyclical (+12) and energy (+9) – have seen improving tally signal counts in Q3.

Healthcare, which already ranks as the 11^th sector, has seen the largest decrease in tally signal count for the quarter so far with 13. Like healthcare, real estate and consumer non-cyclical have witnessed similar tally signal deterioration since April, keeping the sectors in the bottom half of the NDW DALI sector rankings. Two sectors worth monitoring closely for further tally signal deterioration as the third quarter moves toward a close are financials and utilities. Both currently rank within the top half of the DALI sector rankings, but recent tally signal decreases have brought both within proximity to technology (in 3^rd) and basic materials (in 6^th). Although technology briefly fell out of the top half of the DALI sector rankings in April this year, the top four have remained in their leadership positions for more than 12 months.

For further updates on changes to NDW DALI asset and sub-asset class rankings check out the Index and DALI Overview Video, published each Wednesday.

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