Financials were one of the strongest sectors through the first three quarters of the year. The sector ranked in the top three within DALI’s sector rankings and had an average score reading above 4.0 on the Asset Class Group Scores page at the end of September. However, financials have regressed over the past few months and are now firmly in the equal weight or neutral basket with respect to other sectors. The broad technical picture is average at this point when looking at the Financial Select Sector SPDR ETF (XLF) which has an acceptable 4.84 fund score but has been range-bound for the last five months. A couple of important support levels to watch moving forward are $51.50 and $50. Below $50 there isn’t any support until the bullish support line with further support at $45.50 and $45.

One of the areas within financials that has deteriorated recently are payment processors. A proxy for the space is the Amplify Digital Payments ETF (IPAY) which has a poor 2.18 fund score and a negative score direction of 2.54 which speaks to the decline in strength. IPAY was unable to get back to its January highs from earlier this year before falling in September and October. IPAY is down just over 11% year-to-date, lagging both the S&P 500 and the broad financials sector. Some of the blue-chip names like American Express (AXP) and Mastercard (MA) maintain a five out of five technical attribute rating with AXP being far and away the leader in the subsector. A lot of the issues were with lesser used payment processors that had a crypto focus or buy-now-pay-later model which are expected to be volatile and had been weak for some time. However, Visa (V) may be signaling that issues experienced by riskier companies are creeping up to more established names. V recently broke down into a negative trend and reversed down on its market relative strength chart for the first time since 2022 after giving four consecutive sell signals. While MA is still a perfect 5 for 5’er, it has a year-to-date return of 2.08% which is worse than V. MA also trades on two consecutive sell signals and is shaping up for a test of its positive trendline. Overall, for a few months it seemed like the weakness in the payment processor space was limited to the smaller companies with riskier business models but that has started to expand out to blue chip names like Visa and Mastercard and potentially signaling weakness for the broader economy.

Many recent reports have touched on breadth within broad markets and where the recent improvements leave participation as we move into 2026. However, it is important to remember that this idea of market participation isn’t black and white. Just like there can be weak stocks in otherwise strong sectors (or vice versa), any given sector’s participation can vary vastly from that of the overall market. In fact, if you call in and ask the analyst team, most of us will agree that a core part of our security selection process in a given is identifying whether we can throw a dart at a list or perhaps need to be more selective. A sector with broader participation suggests we can deploy assets in a more equal weighted fashion, while narrower participation might suggest we need to focus on the select few names that are performing well.

We can dig a bit deeper into this idea of sector participation by looking at the technical pictures of a suite of equal-weighed sector representatives compared to cap weighted options which primarily focus on a subset of smaller names. The idea being, a preference for cap weighted options would suggest a smaller group of larger names is leading the way, while a preference for equal weighted assets denotes a more balanced approach to a sector’s strength or weakness. The table below starts our analysis with an absolute perspective, comparing each sector’s representative and their fund score as of 12/10/25. A couple of general observations.

• Most sectors are quite close in overall fund score, but the overall trend is that the cap weight representative outscores the equal weight option by .35 fund score.
• Nearly every sector sees both options earn the same “rating” by NDW standards. The major exceptions being Communication Services (EW Hold, CW Buy) & Energy (EW Hold, CW Sell).

But as many NDW faithful know, the absolute picture is often times just the start of our analysis. When trying to select between two similarly strong assets, we can use relative strength tests which pit options against each other in an arm-wrestling contest. Below we pushed together 11 different RS charts, one for each sector comparing equal and cap weighted options. Do note, the most “consistent” chart scale to compare ended up being a 2% scale, which is different than the normally quoted 3.25% scale. The reason for the smaller scale is to allow more price action to enter the chart since many of them trade somewhat similarly despite the differences in weighting of top holdings. The colors relate to the sectors ranking in DALI. While large trends remained consistent, there were a few interesting charts:

• XLC vs. RSPC shows cap weighted options at its highest recorded level of relative price.
• XLK vs. RSPT is at its highest level since 2002 before the dotcom bubble burst. This isn’t an inherently bad thing but is at least conversationally interesting. Said plainly, the big tech companies are expensive, relatively speaking.

Of course, it can also be useful to zoom out of the pure 1 to 1 relationship and utilize the matrix to mash up many more RS charts. To do so, we can utilize the matrix tool. Included in the image below is the 22 different sector funds as well as SPY, which many of you might utilize as a form of sweepdown/benchmark. SPY sits in the 7th position, ranking behind more risk on areas like technology, communication services, consumer discretionary, etc. Of interest in terms of near-term winners/losers are healthcare and financials, both of which has moved from the barbells are the matrix more towards the center.

Today’s conversation reminds us that “overall market participation” can look quite different depending on where you stand and what sector you are looking at. For the most part, performance still appears to be driven by a smaller group of names, but utilize today’s exercise as a use case for identifying where and how to track changes as they occur in real time.

Each week the analysts at NDW review and comment on all major asset classes in the global markets. Shown below is the summary or snapshot of the primary technical indicators we follow for multiple areas. Should there be changes mid-week we will certainly bring these to your attention via the report.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email james.west@nasdaq.com.

Data represented in the table below is through 12/09/25:

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