During periods of volatility, investor sentiment tends to fall somewhere between the extremes of “it’s so over” and “we are so back.” Recent action serves as a clear example of how quickly investors can swing between the two, with markets moving decisively toward the latter over the past ten days as conflict in Iran has subsided.

On March 30th, the S&P 500 (SPX) was within one percent of entering a correction while on a streak of three consecutive sell signals, with fears of a bear market intensifying. Meanwhile, high‑momentum areas of the market were taking an even larger hit, with the iShares MSCI USA Momentum Factor ETF (MTUM) falling as much as 12.5% and triggering its first sell signal since April of last year. Just ten days later, the S&P 500 gained nearly 7% to return to a buy signal for the first time since January. The index is now within three percent of all‑time highs, with initial support at 6,350 then 6,250. Momentum names have also flexed their muscles in recent weeks, with MTUM gaining 12.5% over the last ten days, reversing back into a column of Xs. With equities finding support and resuming their advance, it may signal that buyers are once again in control of the market.

Another way to quantify the strength of momentum is through the relative strength spread index (RSSPREAD), measuring the gap in performance between a basket of high-momentum names and a basket of low-momentum names. If the RS Spread Index is moving higher, high‑momentum names are outperforming low‑momentum names. After previously declining and sitting on a sell signal, the RS Spread Index reversed to a buy signal this week while setting new all‑time highs, signaling a rebound in high‑momentum names. A rising RS Spread is typically the most conducive environment for momentum strategies.  

Despite heightened volatility this year, high‑momentum names have quietly delivered one of their strongest performances in recent years, with the RS Spread up 18% YTD. Said plainly, the market’s leaders are outperforming the laggards by 18% in 2026, marking the widest spread since 2022. Looking at prior years through April 8th, 2026 marks the fifth‑best start for momentum dating back to 1990, and there’s reason to believe those leaders could continue their hot streak When the RS Spread has been positive through April 8th, leaders have averaged an additional 8.8% of outperformance versus laggards over the remainder of the year. Additionally, when the index was up more than 15% by this point in the year, the results were even stronger, with the spread widening by an average of 12% over the remainder of the year. By contrast, poor starts for the RS Spread have historically been indicative of a lack of further momentum. If the RS Spread is negative through April 8th, the spread has risen just 0.5% during the rest of the year. Momentum tends to be self‑reinforcing, and strong starts like the one seen so far have historically been more likely to persist, boding well for momentum strategies in 2026.

International equities had a banner year in 2025 and have shown sustained strength so far in 2026. The broader asset class moved into the top-ranked position in our DALI asset class rankings in February, saw some volatility in March, but ultimately ended the first quarter ranked ahead of the other broad asset classes. Underneath the hood, sharp improvements from some focused areas have contributed to that recent strength.

Capitalizing on strength in international equities can be difficult. Different countries have different economic drivers to consider. There are also a multitude of different factors that can affect the price action of individual securities within each country. This often leads to increased dispersion between leaders and laggards in foreign markets, producing big winners but also big losers. Using a momentum-focused approach can be beneficial here, allowing a defined process to determine the strongest securities while avoiding the weakest ones.

Our international Technical Leaders indices seek to do just that, taking broader inventories from developed markets and emerging markets then only focusing exposure on the 100 names from each list that have demonstrated the strongest momentum. This includes the indices behind the Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE) and the Invesco Dorsey Wright Developed Markets Momentum ETF (PIZ). Both indices were reconstructed at the end of the most recent quarter, leading to some allocation shifts to better align each strategy with areas of improvement.

Developed Markets

The Invesco DWA Developed Markets Momentum ETF (PIZ) saw 42 changes in the most recent evaluation, which was the same as the previous evaluation. There are 21 countries represented, including 12 that saw an allocation shift. Both of those are lower than last quarter, so we saw more rotation in the names within countries than the rotation in regional strength. Japan is now the most overweight country at 17.3%, adding 13.8% in new allocation. South Korea saw the second highest new allocation added at 11.6% bringing its total allocation north of 10%.

On the sector side, finance remains at the top holding at 30.2%. Producer manufacturing and electronic technology saw the most new allocation added at 15.9% and 6.5%, respectively. This brings each of those industry groups to double-digit allocations within the portfolio.

Emerging Markets

The Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE) saw slightly fewer allocation shifts than PIZ at the end of last month, with 38 names swapped out for new positions. This was also a much smaller allocation shift in PIE than we saw at the end of Q3. There are 12 countries represented in the holdings, seven of which saw changes. Taiwan saw the greatest number of new names added, picking up 15.7% in new allocations to bring its total weight to 57.2%, making it the largest country weight in the portfolio. China saw 13.4% of new allocation, but its total allocation increased marginally from 16.7% to 16.8%. This was a notable decline from the 33.7% in total China allocation six months ago. These two countries alone still make up over two-thirds of the fund’s total allocation.

From a sector standpoint, electronic technology saw a notable pick-up in new allocation, with 13.3% of new allocation to bring the total allocation to over 39%. Health technology and energy minerals saw the next largest amount of new allocation added at 5.1% and 4.4%.

Altogether, these changes reflect a continuation of the relative strength trend that has produced improvement for international equities in recent quarters. Both PIE and PIZ are seeing wider sector and regional participation, which are positive signs for the momentum-based strategies these indices represent. Markets will likely change somewhat over the next three months, and the process behind these strategies will push them toward the strongest areas at the next quarterly evaluation. However, the consistent leadership displayed from the broader international space in recent months leaves them well positioned for the second quarter.

Disclosures:

This article is intended for Financial Professional Use Only.

Management and other expenses can have a material impact on performance when compounded over time. Past performance, hypothetical or actual, does not guarantee future results. In all securities trading there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown.

Click here for more information from Invesco on the Invesco Dorsey Wright Developed Markets Momentum ETF (PIZ): https://www.invesco.com/us/en/financial-products/etfs/invesco-dorsey-wright-developed-markets-momentum-etf.html

Click here for more information from Invesco on the Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE): https://www.invesco.com/us/en/financial-products/etfs/invesco-dorsey-wright-emerging-markets-momentum-etf.html

Dorsey, Wright & Associates, LLC is owned by Nasdaq, Inc. and we have affiliates who also provide financial services, research, information, and act as Brokers/Dealers to a wide variety of clients. Our affiliates use the information we create to create indexes, which are then used to create Exchange Traded Funds. These things create a potential conflict of interest in that we may have an incentive to promote or use the products and services of our affiliates and business partners. A number of Dorsey Wright representatives are registered with and hold securities licenses with the affiliate broker-dealers. In this capacity, they assist with the marketing and distribution of Exchange Traded Products.

Daily Option Ideas for April 9, 2026