How to use relative strength to gauge a market rally and pick winners

• Relative strength is a comparison chart dividing one asset's price by another to show outperformance, indicating market leadership.
• The S&P 500 market-cap weighted vs. equal-weighted ratio highlights current mega-cap dominance, similar to the dot-com era, but a flattening or falling line signifies a healthier, broader rally.
• For 2026, the expectation is for AI diffusion to broaden market participation beyond the 'Mag 7', favoring cyclical plays such as industrials, retail, and banks.

The video explains relative strength as a technical tool to gauge market broadening. It uses the S&P 500 market-cap weighted vs. equal-weighted index to illustrate recent mega-cap dominance (Mag 7) and suggests that a broadening rally, where more stocks participate, is a healthy sign for the market. Cyclical sectors like industrials, retail, and banks are recommended for 2026.