Beginners Series Webinar: Join us on Monday, November 9nd at 2 PM (ET) for our NDW Beginners Series Webinar. This week's topic is: Point & Figure Basics. Register Here.

Below are highlights from the NDW Morning Update Video for the morning of 11/6/26. Access the video on the NDW Morning Update Video page. 

• Markets were rocked to their core on Thursday, putting together one of the worst days in recent memory. The S&P 500 dropped 4.36% for its worst day since the start of the Tariff Tantrum in April of last year.
•  Growth areas of the market were hit the hardest, seeing the Nasdaq-100 drop 6.5% during the session—its worst one-day decline since March of 2020. Yesterday’s move caused the index to complete a third consecutive sell signal while also moving back into a negative trend. That said, the index is down in heavily oversold territory, so it could consolidate or reverse higher in the near-term. For additional context on the move, check out our recent featured article.
• Fears over potential roadblocks in the AI buildout were among the biggest overhangs on the day, while technology led the way to the downside. Tech fund XLK fell 8% on the day, while semi representative (SOXX) cratered more than 12%. Within our DALI rankings, technology has fallen from 2nd to 7th this week.
• While the average stock held up better than most headline indices, it still wasn’t pretty. The S&P 500 Equal Weight (SPXEWI) dropped 2.89%, nearly 1.5% better than the normal S&P 500. Meanwhile, the Positive Trend Percent for the S&P 500 (^PTSPX) fell less than two percentage points to 60.8%, marking a relatively subdued drop in long-term participation.
• Despite the severe selloff, the market’s “fear gauge” is still in relatively normal territory. The VIX expected 30d volatility index sits around 26, which is only a bit above the historical average of ~20. While excessive fear and a high VIX can be a contrarian indicator in favor of the market, it isn’t until Vix readings move to 30 or higher that market returns are above their historical norms.
• During times of panic, it can be easy to deviate from your process, and the sharp one-day drop certainly qualifies as one of these instances. However, the weight of the evidence still continues to shine favorably on domestic equities, with the group sitting first in our DALI rankings. That said, international equities have weakened enough for fall behind commodities in DALI's rankings. 

Momentum started this year off hot, carried higher by technology and semiconductors… until it wasn’t. The iShares MSCI USA Momentum Factor ETF (MTUM) was up as much as 38% this year through June but has since fallen more than 27% from those highs. While investors can’t turn back time and undo the damage that has already been done, we can offer context and potential optimism for momentum going forward.  

Uncharted Momentum Pullback 

MTUM fell more than eight percent on 11/5 and is down 22.5% just over the last month, leading to a plethora of technical developments for the fund. It’s now on a streak of three consecutive sell signals, the most recent of which also moved the fund’s trend back to negative. MTUM holds a fund score of just 1.63, marking its lowest levels of strength since 2023. Suffice to say, things look unfortunate for the fund.  

And if you thought things couldn’t get any rarer, then you’d be wrong. MTUM’s recent level of underperformance relative to the average stock hadn’t ever occurred prior to recent action. Specifically, MTUM has lagged the S&P 500 Equal Weight by around 25% over the last month. For context, the next worst period outside of this year was 17% from 2020. Said plainly, momentum investors are experiencing the worst month for the factor in at least the last thirty-four years. This relative movement caused MTUM to move to a market RS sell signal for the first time in around three years as well.  

The Silver Lining 

The good news is that momentum is typically self-correcting, as periods of underperformance gives way to either a rebound in existing leadership or a rotation towards new areas of strength. And currently, the oversold levels of momentum names do offer some optimism for the factor. MTUM’s overbought/oversold (OBOS) reading of -167% places it not only in oversold territory but also at a level of washout the fund has rarely ever experienced. Only July 1994, November 1996, and January 1999 have ever seen the fund at more oversold levels, highlighting the extreme nature of recent action.  

Another way to view the effectiveness of momentum is by looking at how much the leaders (best performers) of the market have outpaced the laggards (worst performers). NDW looks at the Relative Strength Spread (RSSPREAD) as a proxy for exactly that—how much the leaders are outpacing the laggards. It takes the performance of the top quintile (best 20%) of stocks minus the bottom quintile (worst 20%) of stocks, showing the excess return of the leaders versus the laggards.   

Over the last month, the market laggards have outperformed the leaders by more than 15% for just the 13th time since 1990. This also marks the second time in a span of a few months the RS Spread has pulled back so hard. However, similar momentum pullbacks have been positive for the factor more often than not. Overall, the leaders beat the laggards over the next year in two thirds of similar momentum declines, while leaders outperformed by an average of 14% over that span. 

Not every instance has played out this cleanly, but the broader tendency has been for old leaders to rebound or new leaders to emerge, allowing the factor to flourish once again. Additionally, the worst periods for momentum typically come when the market rallies off a bottom, such as late 2002 and second half of the GFC. With the S&P 500 less than 6% from all-time highs, it’s hard to argue that we’re rallying off a major bottom soon. Regardless of where markets head, similar momentum reversals suggest the potential for momentum to reassert itself as trends stabilize.  

The option suggestions featured here are pulled from the NDW Options Ideas tool. These are just a sample of the ideas that can be found there. The Options Idea tool contains numerous additional income and speculative plays. It also offers relative strength-based screens targeting the highest (and lowest) relative strength stocks and ETFs that have recently moved counter to their longer-term trend. To access or subscribe to the Options Ideas tool, click here.

Call

SPDR S&P 500 Trust (SPY) Jan 29 $738 Call

Put

Adobe Systems Inc (ADBE) Feb 19 $240 Put

Income

Delta Air Lines Inc (DAL) Dec 4 $81 Put