Housing affordability has been at the forefront of US economic talks over the last few years following the boom in housing prices since 2020. However, we are starting to see the aftermath of unaffordable housing prices in the US. National housing supply has trended higher over the last few years and is now back to pre-2020 levels. At the same time, demand for homes has collapsed with home sales materially below where they were before 2022. Higher interest rates and prices have had a clear impact on sales since 2022, but tight supply helped prices to continue to advance in 2023 and 2024. As supply has returned to more normal levels and home sales remaining in the doldrums, home value growth has stagnated over the last year and is flat year-over-year. The chart below highlights the increase in supply and dampened demand, impacting home value growth. The natural recurse for this would be lower home prices until demand lines up better with supply. While we haven’t seen that yet on a national level, certain markets are feeling some pain, particularly in states like Florida, Arizona, Texas, and California which have all seen their home value growth over the last year fall by more than 2% (Reventure).

A first order impact of a slowing housing market would be on the performance of homebuilders. One of the biggest names in the space, Lennar Corporation (LEN), announced poor fourth quarter results this morning while the stock was already down more than 13% this year. Looking at the homebuilder sector via the iShares U.S. Home Construction ETF (ITB), the technical picture isn’t much better than LEN. ITB has a poor fund score of 1.97 and trades about 20% from all-time highs. It will be interesting to watch this macro development play out, especially due to shelter’s large contribution to CPI data which will influence Fed decisions as we head into 2026. Nonetheless, real estate adjacent equities like homebuilders are in a poor spot from both technical and fundamental standpoints.

There are virtually endless combinations of relative strength charts you can run on the NDW platform at any point in time. Most of us (yes, even the analyst team) won’t be able to ever visit even a fraction of the available charts in our lifetime… which is why it is important to monitor those that really matter. The idea of something mattering at all is subjective, but most of us would agree that a “meaningful” relative strength chart helps us gain insight into who is winning a key matchup. Again, a hard and fast rule to define a “key relationship” will be a tad spotty, but more often than not we will focus on large, overarching trends that help guide our hand in more than one investment decision. Knowing what one stock is beating another is certainly useful, but knowing if we should broadly be risk on or risk off with new accounts/cash can help us gain perspective through a wider lens.

For many of us, one of these key relationships will be watching the cap- and equal-weighted S&P 500 as a north star into what kind of stocks are leading the way. For the last decade, cap-weighted options have largely had their time in the sun as mega-cap tech expanded its reach at the expense of the “average” stock. This paradigm isn’t anything that is particularly new, and today’s piece won’t challenge this idea, but will serve as a general reminder how the technicals come into play and how you can take advantage of trends over time.

The genesis for this conversation was the 1% relative strength chart between cap-weighted SPX and equal-weighted SPXEWI (included below). While this chart has maintained a buy signal since mid-2023, it reversed back down into O’s favoring SPXEWI following action on Monday. This serves as the first action favoring equal weight options since the 1st quarter of the year and comes as market breadth expanded off near-term lows. Following either signal or column switching has been profitable since the early 90’s, speaking to the consistency of the chart. There are largely two trains of thought here:

• Other points of equal weight leadership have been fleeting since 2023 and near term outperformance for equal weight representatives is stretched (more on this later). Stay the course with cap weighted names which maintain long-term strength.
• BUT every meaningful change in leadership starts with a simple three box reversal. Equal-weighted options also look strong as breadth has expanded. The risk/reward profile to adding to equal-weight exposure is still attractive.

Both arguments have merit. The rolling 1-month performance spread favoring SPXEWI sits at ~2.1% (as of 12/16/25, a 90th percentile move dating back to 1990) suggesting that here might not be the best time to go out and add more equal-weighted exposure. Meanwhile, long-term strength remains largely in line with your cap-weighted names via the DALI or ACGS pages, urging us to not enter into anything too hastily. Perhaps most importantly, there is seemingly more business risk than ever for not keeping up with the cap-weighted S&P 500. Being too quick to trade in your ~7% exposure to NVDA via SPY for the ~.20% exposure via RSP can leave you with a very difficult conversation with clients as you open up the new year…. Assuming this reversal is a mere headfake and the long-term preference resides with mega-cap names.

At the same time, equal weight names have shown vast improvement over the last month or so as breadth has expanded. While it still lags behind the average cap weighed fund, the near term trend comparing the two groups via the asset class group score pages shows a rapid uptick in strength for equal weighted assets. Both groups score above 4.0, signaling strength for either group as we close out 2025. While near-term outperformance is stretched in favor of SPXEWI, it is anything but that in the long term. SPXEWI has underperformed SPX by nearly 40% over the last three years. That isn’t to say that a rebound is “needed” by any form of the word (things can continue to stretch as evidenced by the dotcom bubble or coming off the bottom of the GFC) but does add to the idea that the long-term risk/reward profile is at least worth considering when appropriate in client accounts.

The most compelling argument for either option will be entirely client dependent. If you have a client who tracks the cap-weighted performance via the nightly news and will cause major headaches if you lag behind, maintain your exposure to the cap-weighted options as they aren’t “weak” by any form. On the other hand, if you have a client already over their risk budget towards a handful of technology names, take the recent developments as a sign that you’re in the clear to diversify into a wider pool of names. Under either scenario, continue to watch the charts to tell us if this equal-weighted outperformance is just another flash in the pan or something a tad more meaningful.

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 12/16/25:

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