Investors have been thrown for a loop over the last several months, with volatility spiking as markets whipsawed up and down. During these moments of instability, having systematic guides to lean on can serve as one of the few sources of clarity. Among the most helpful tools for cutting through noise are participation indicators, which can identify when conditions are stretched and help gauge when those extremes may be coming to an end. And for the first time in a while, we’re seeing early signs that selling pressure is beginning to diminish from unusually bearish levels.

Among the first dominoes to fall when change is underway are the ten week indicators (TWs), measuring the percentage of stocks trading above their ten-week moving average. The ten week indicator for the S&P 500 (^TWSPX) reversed sharply lower to start March, falling to borderline washout territory below 20%. Action over the past week caused the indicator to reverse back into a column of Xs for the second time, signaling that selling pressure may be diminishing in the near term as stocks find firmer footing. However, given the sensitive nature of the ten-week indicator, it can be prone to false signals, so we often look to intermediate-term indicators to confirm movement in the TWs.

Among the most widely used intermediate-term indicators are the bullish percents (BPs), which measure the percentage of stocks in a universe trading on a PnF buy signal. Looking at the bullish percentage for S&P 500 stocks (^BPSPX), the indicator seesawed up as uncertainty grew before eventually plummeting to the mid-30s to end the quarter. For the time being, the indicator sits on the fringes of what is considered normal. A decline in the bullish percent is negative overall, but a move below 30% could indicate that the market has sold off too heavily.

To evaluate longer-term participation, NDW uses the positive trend indicators (PTs), measuring the percentage of stocks trading in a positive trend on their PnF chart. The positive trend percentage for the S&P 500 (^PTSPX) held steady throughout most of the quarter before dropping to levels near 50% in March. Most of the market’s gains occur when PTSPX is above 50%, making the market’s ability to maintain or improve upon current levels a crucial factor in whether we see a strong performance during the rest of 2026. That’s not to say a move below 50% would be a death sentence, but it would represent a broader risk‑off signal.

Quarter endings and beginnings are typically a good time to provide a touch point with your clients and prospects, so in recognition of the change of calendar, we wanted to give you a sample newsletter to aid you with this communication. You want to let your clients know that you are holding the reins of their portfolios and that you are holding on tight. This letter has not been FINRA approved; however, you are welcome to use the text as you like. Feel free to "slice and dice" the text to best incorporate it within your business.

Sample Client Newsletter: Q1 2026

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The first quarter of 2026 is officially behind us, and it was a rocky start for many corners of the market. The S&P 500 finished the quarter down more than 4%, its first down quarter since Q1 2025. Several factors contributed to the decline including souring sentiment regarding AI and worries about private credit. However, things began to deteriorate more quickly in March after the conflict with Iran began as investors worried that rising oil prices could slow the economy and stoke inflation.

International equities finished the first quarter in the green as the MSCI EAFE Index and MSCI Emerging Markets Index gained 1.9% and 3.8%, respectively. However, the US dollar strengthened late the quarter, which was a significant headwind for non-US assets and both indices finished the quarter well below the highs they reached earlier in the year.

Bonds struggled in the first quarter as long-term US Treasury yields rose; the Bloomberg US Aggregate Bond Index finished the quarter down slightly. At the beginning of the year, the market was anticipating that the Fed would lower interest rates this year. Those expectations had faded by the close of the first quarter with the market now pricing in about a 70% chance that the Fed will hold rates steady through the end of the year. Credit also tightened during the first quarter as high yield spreads, which reflect the extra return investors demand for lending to less-creditworthy borrowers, widened. Rising credit spreads suggest that investors are concerned about borrowers ability to repay their debt and possibly about the economy.

Precious metals had climbed relentlessly higher for most of the last year as gold and silver notched a seemingly unending string of record highs. That all changed in late January, when silver fell more than 30% in a single day while gold declined a comparatively modest 11%. Both metals rebounded over the next few weeks and finished Q1 in positive territory but never retook their highs. Energy has taken over as the primary area of strength in commodities as the conflict in Iran pushed oil prices to multi-year highs.

After some shuffling in Q1, international equities sit atop the asset class rankings in our Dynamic Asset Level Investing (DALI) tool, which provides us with a heat map of where relative strength (and weakness) resides across and within asset classes. Within domestic equities we have seen a shakeup in the sector rankings as technology, which led the rankings at the end of 2025 has fallen to fourth while energy has climbed to first after beginning the year in ninth place. The shift in the sector rankings is a sign that technology’s dominance may be giving way to leadership from other segments of the market but it remains to be seen if energy will show sustained leadership as the conflict in the Middle East has been a major driver of its recent strength.

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Please be aware that the content of this newsletter is based on the opinion of Dorsey, Wright research and may differ from the research provided by your financial advisor. This market theme letter was written by Dorsey, Wright & Associates and is provided courtesy of your advisor.

The performance numbers in this article do not reflect dividends or transaction costs.  Indexes are not available for direct investment. Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be attained.

Stocks offer growth potential but are subject to market fluctuations. Dividends are not guaranteed; companies can reduce or eliminate their dividend at any time. There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions.

The information contained herein has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs.  Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions.  Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable (“information providers”).  However, such information has not been verified by Dorsey, Wright & Associates, LLC (DWA) or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein.  DWA and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded).  Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.  Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This document does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.

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Daily Option Ideas for April 2, 2026