International equities have shown more recent improvement than domestic equities in our DALI rankings.
Beginners Series Webinar: Join us on Monday, November 24th at 2 PM (ET) for our NDW Beginners Series Webinar. The week's topic is: Dynamic Asset Level Investing (DALI) and DALI Strategies. Register Here
International equities are inching closer to domestic equities in our Dynamic Asset Level Investing (DALI) rankings. Since the end of October, we have seen international equities gain five relative strength (RS) buy signals, while domestic equities have lost three signals. This is not very significant movement based on the sharp price declines we saw from domestic stocks over the past week. However, these two asset classes have already been close in their RS buy signal tally count for several months. Domestic equities still maintain the top ranked position, but the door has been left open for some shifts as we close out the year.
These asset class rankings are built on a large RS matrix. Each asset class has an equal number of representatives included in the matrix, so no one area gets an unfair advantage. While the specific representatives are proprietary, it is important to know that they are meant to provide a diverse list of names for each asset class rather than just going with the biggest part of each market. Just like any RS matrix, the rankings have a buy rank (longer term) and an X rank (shorter term). The DALI rankings aggregate the number of buy signals, using that longer term number. What would the picture look like if we take the same tally concept and apply it to the shorter-term X rank?
The tally X rank actually amplifies the recent improvement for international equities, as we see that they move ahead of their domestic counterparts to take the top ranked near-term spot. Domestic equities sit in second, followed by commodities, which are further separated down into the third position. This echoes some of the recent signal shifts seen in the buy signal rank but could very well unwind with a few days of sharp action from each of the asset classes. Still, the improvement from international equities makes it worthwhile looking toward areas of strength to prepare for a potential asset allocation shift.
One area that has seen recent improvement in international equities is Latin America. This is shown through the sub-asset class rankings in DALI, where we have seen the Latin American region move from fifth (out of six spots) to second in just two weeks. The iShares S&P Latin America 40 ETF (ILF) has been indicative of that recent improvement. The fund has marched steadily higher since April, giving four consecutive buy signals while ascending to new multi-year highs at $31 earlier this month. This has been met with a sharp improvement in fund score, which comes in at a recent posting of 4.85 after rising over 1.8 points. Weekly momentum also recently flipped positive, suggesting the potential for further upside from here. The past two days of market action saw ILF retract from that extended position to a more actionable range just above the middle of its trading band. Those looking to focus on recent strength in foreign equities should keep ILF on their radar as we look toward 2026. Initial support is seen at $27.50 with further support down at $25.
