As recently as last month, some market participants were speculating that technology could be entering a bear market. Since then, sentiment has swung sharply in the opposite direction, with Technology leading the market to the upside in recent weeks. The Technology Select Sector SPDR Fund (XLK) is up roughly 17% in April, putting it on pace for its strongest calendar month since October 2002. As a result, tech has risen from fifth to second place in our DALI sector rankings. Meanwhile, XLK has regained near-term market relative strength, pushing its fund score up to 5.63, which is the highest among the major sector SPDR funds.

Within Technology, leadership remains highly concentrated in semiconductors, while software and cybersecurity stocks have acted as a drag so far this year. The VanEck Semiconductor ETF (SMH) is up 33.8% YTD, whereas the First Trust NASDAQ Cybersecurity ETF (CIBR) and iShares North American Tech-Software ETF (IGV) are down 6.8% and 20.9%, respectively. In fact, semiconductors rank at the very top of the NDW group matrix, while SMH holds a near-perfect fund score of 5.94, arguably making semiconductors the strongest area of the market. But, as is often the case with seemingly perfect things, there’s a catch…

While momentum‑based strategies welcome strong gains, advances that are too sharp can push prices into overbought territory, increasing the risk of near‑term consolidation. NDW’s Overbought/Oversold (OBOS) readings attempt to quantify how extended a security is relative to its prior ten weeks of price action, with readings north of 70% indicating significantly overbought conditions. XLK currently sits at an elevated—though not egregious—intraday reading near 100%, while SMH is at approximately 135%, matching its highest levels on record. Historically, readings at these levels tend to signal muted performance over the following two weeks rather than a deterioration in the longer‑term trend. Notably, this rebound follows a sharp move up from previously oversold conditions, suggesting that the magnitude of the shift may be more informative than OBOS readings alone.

There are 21 other instances where XLK gained more than 10% in a calendar month. In those prior instances, the fund typically cooled off, averaging flat performance over the subsequent six months and a modest 5.1% gain over the following year. However, previous instances occurred disproportionately during inflection points. One‑third of those episodes occurred during the dot‑com bubble period (Late-99 to Mid-02), with tech falling 30% or more each time over the next year, pushing averages meaningfully lower. By contrast, the remaining two‑thirds preceded highly bullish periods, averaging a 27.8% one‑year return outside of the dot‑com bubble. Regardless of whether the current environment ultimately proves to be bubble‑like or not, extreme months such as this tend to precede elevated volatility, both to the upside and downside. Given how extended semiconductors have become, the group may experience even greater volatility than the broader Technology sector.

Overall, technology remains an important area of emphasis within portfolios due to its long‑term relative strength. Portfolios currently underweight technology may want to exercise patience before adding exposure given the sector’s near‑term overbought condition. Those with existing technology exposure, especially within semiconductors, should continue to maintain those positions. That said, if historical parallels are any guide, the sector could experience elevated volatility in the months ahead, making technology an especially important area to monitor, particularly should movement begin to resemble prior bubble‑like periods.

After three consecutive weeks of positive action for all U.S. indices with most reaching highs either toward the end of last week or early this week, most are flat to slightly negative for the week through Thursday’s (4/23) close. While not the top performing U.S. equity index during the second quarter or in recent weeks – that title belongs to the Nasdaq Composite (NASD) or Nasdaq-100 depending on the timeframe – the Russell 2000 Index (RUT) has been hot on their heels and outperformed other U.S. equity indices like the S&P 500 (SPX) off recent lows. For the second quarter so far, RUT has gained 11.17% (3/31 – 4/23), which places it up more than 11.81% year-to-date and the top performing U.S. equity index for 2026 so far.

On the trend chart, RUT returned to a buy signal and moved back into a positive during the first full week of April’s trading before climbing higher to clear prior highs toward the end of last week and mark a new all-time chart high during Tuesday’s (4/21) trading at 2800. Even with the slight pullback from Tuesday to Thursday’s close, the chart continues to maintain its current column of Xs. While an extended column of Xs, RUT resides on the threshold of what NDW would qualify as overbought and out of actionable range based on the weekly OBOS reading in the 60% range. Further extension and a move toward the top of the 10-week trading band would meet this criterion, while a pullback toward the prior highs in the lower 2700 range would be constructive, healthy chart action.

When examining the U.S. size and style action on the Asset Class Group Scores page small cap groups have continued to show leadership thus far during 2026. The line graph below shows the All-US Small Cap group have also improved in average score to a larger magnitude off the late March low points versus its All US Large and Mid-Cap counterparts.

When looking at just the U.S. Style view on the ACGS page the Small Cap Value, Blend, and Growth groups currently score higher than their Large and Mid-Cap Value, Blend, and Growth counterparts. Additionally, all three Small Cap Value, Blend, and Growth groups score above 4 and rank among the upper echelons in terms of positive score direction, a measure of near-term score improvement.

While the near to intermediate term shows technical strength and superiority for small caps, the long-term relative strength within DALI and elsewhere favors large caps still for the time being. With the other size and style groups maintaining sound technical pictures as well, small caps still have competition. When examining client portfolios and considering strength within all three size and style groups small caps are likely a part of the conversation. As of Thursday’s close, more than half (120) of the 231 small cap ETFs and just shy 60% of the 887 small cap mutual funds on the NDW platform maintain fund scores north of 4 (out of 6).

Featured Charts:

Portfolio View - Major Market ETFs

Daily Option Ideas for April 24, 2026