Lots of relative action has occurred over the last few weeks. In particular, risk-on sectors have taken some strength back from cash or the broader S&P 500, while risk-off areas have struggled to keep up. We cover what you need to know today.
At the crux of Nasdaq Dorsey Wright research is relative strength. Knowing when one asset is in control of another, and subsequently which asset you need to look towards for investment, is mission critical when it comes to understanding a constantly evolving relative strength landscape. While no one signal will be “right” every time, zooming out to look at a wider group of changes over time can help guide your hand when it comes to making sense of broader leadership changes. There has certainly been a wide array of shifts over the last few months as markets dealt with the rise and fall (and maybe rise again?) of conflict in the Middle East. As the broader S&P 500 has now completely priced out its decline spurred on at the start of US involvement in Iran, we will take today’s report to see how different sectors have fared against two key benchmarks: the S&P 500 and cash (MNYMKT)
Before jumping in and looking at any individual RS charts, we can first take a look at absolute performance so far this year. As of 4/19/2026, markets have largely dug themselves out of the hole built up throughout the first quarter. In fact, there are only two sectors in the red YTD, that being financials and healthcare which have both struggled in 2026. Benchmark SPX has gained just over 4%, trialing seven sectors for the year. A brief aside, a wide array of sectors outperforming the benchmark can foster an overwhelmingly positive environment for trend followers. That said, energy maintains its position at the top of the pack so far this year, seeing XLE gain just over 23% from a pure performance perspective. Basic materials, industrials, real estate, utilities, consumer staples and newcomer technology fill out the rest of the pack.
Despite leading the way so far this year, energy’s recent relative strength has waned as markets rocketed off 2026 lows. While it goes without saying that further unrest on the global stage could push energy areas higher, recent de-escalation has seen XLE retreat off of its recent highs. From a relative perspective, this also saw the fund reverse down on its 3.25% & 6.5% (pictured below) RS charts against SPX, as well as a more sensitive 3.25% against (MNYMKT). All this to say, there is certainly some merit to the argument that those of you that were able to pick up exposure to energy during this most recent run-up should take some off the table. On the other hand, it also might be worth maintaining some exposure as a bit of a hedge against further unrest in the global energy supply. From a purely technical perspective, however, recent relative declines warrant we watch newfound energy exposure a bit more tightly as we not trade off highs.
Meanwhile, several other sectors have seen relative shifts against either SPX or MNYMKT over the last few weeks. To name a few, staples focused XLP and healthcare fund XLV both reversed lower on their respective RS charts against SPX as the core of the market accelertated to new all-time highs. As risk-off areas too a relative breather, other risk-on areas improved. As mentioned in today’s featured article, consumer discretionary XLY reversed back into X’s against consumer staples XLP, a tailwind for discretionary stocks as we wrap up April. Furthermore, more risk-on groups like communication services (XLC) or technology both reversed back into X’s on their 3.25% RS charts against cash, signaling a pick-up in near-term strength after this most recent exhale.
As an action point for you readers, take the recent shift towards risk-on assets as a tailwind for broader markets heading towards May. While there certainly still are geopolitical risks in play as we sit at all-time highs without a concrete peace deal in place, price action has signaled that markets are confident in further de-escalation. As always, set alerts to be notified of relative shifts as they occur on the charts.
