Why Momentum Could Lead Markets Into Q3 2026

We all know the old adage of “Buy Low, Sell High”, but sometimes this is not always the case. Sometimes you have to Buy High, Sell Higher. Indeed, traditional value oriented thinking that a stock hitting its all time highs is a signal to exit the position but with looking at momentum, positive returns begets positive returns. Looking ahead to Q3 2026, I think we may get a boost by really analyzing the momentum factor and taking advantage of it as it may be the biggest multi-year run since the Dot Com period. We all see the news headlines of persistent geopolitical tensions and even wars as well as the higher for longer interest rate narrative but the trend of winners outpacing laggards appears to have accelerated in my view. One way to capture the momentum is through the ETF PDP. It uses a systematic engine that allows investors to bypass their anxieties and stay aligned with the market’s verified leaders.

Dissecting The Momentum Premium

The $7.6 Trillion AI Engine Powering The Momentum Factor

There are fundamentals backing the momentum fever in the markets and that is the unprecedented explosion in capex spending. In December 2025, the analyst consensus for 2026 hyperscaler spending was just $527 billion. By May 2026, that estimate was revised upward to $754 billion, an 83% increase. That’s the runway right there.

Indeed, the global economy has committed a $7.6 trillion cumulative build out through 2031 across compute, data centers, and power. The momentum factor is riding on concentrated earnings power. The semiconductors, hardware, and utilities industries are projected to benefit, accounting for roughly half of the total S&P 500 earnings growth in 2026.

We’ve seen this propulsion in stocks such as Micron Technology (MU), which saw its market cap increase to $1 trillion in 48 days after crossing the $500 billion market. The median company in the S&P 500 Index is on track for its strongest quarterly growth rate in the past decade out of the 2018 tax cut regime.

The Trillion Dollar AI Build Out

Earnings Growth Trigger

The 2026 rally is powered by a 24% projected annual increase in EPS, with valuation multiples remaining relatively flat at about 21x. We’re seeing a move from multiple expansion to earnings driven gains, making the ability to isolate winners key.

Moreover, the gap between winners and losers has reached its widest since 1990 and in a 36 year high for dispersion, being in an average index fund means that you are diluting your exposure with the bottom 80% of performers. PDP’s over 20% return YTD is as a result of staying concentrated in the top quintile of the market, the only quintile capturing the full force of the current earnings boom.

Low Risk Factor Falling Out of Favour

The low risk factor has become the laggard relative to the leading momentum factor. In North America this factor posted a spread of -13.13% between the top and bottom quintiles. For Asia, low volatility stocks are lagging its high volatility peers by 30%. What we’re also seeing is that the defensive utilities sector is only catching a bid when they pivot toward the AI power demand narrative.

So for this regime the ETF PDP is favored. PDP favours high relative strength and trend persistence and in this regime it is a much better allocation.

Global Factor Scorecard

PDP Mechanics

PDP tracks the Dorsey Wright Technical Leaders Index. This index utilizes a relative strength matrix to solve the leadership identification issue. It matches every security in the index head to head. Each matchup generates a buy or sell signal based on price ratios. The security with the most wins, the most buy signals, becomes the leader and has the #1 ranking.

This approach also uses Point & Figure (P&F) charts which helps to mitigate market noise. For example, a double top breakout on the P&F confirms a buy signal and keeps the fund concentrated in names with verified breakouts.

Currently, while Technology is a top pillar, energy has climbed up the ranks, exhibiting the highest positive sensitivity to increases in 30-year Treasury yields. There’s also been idiosyncratic winners outside of AI with stocks like O’Reilly Automotive (ORLY) and Copart (CPRT). This shows that the momentum factor can capture leadership in sectors outside of tech as well.

The Relative Strength Matrix

The TA of PDP

PDP has been trending nicely when looking at its Daily chart. There’s been a brief dip below its 21-EMA but the ETF quickly recovered. The RSI is nearing overbought levels so PDP is exhibiting strong positive momentum. One thing to note is that there’s some bearish divergence being seen with the RSI making lower highs while the ETF is making higher highs. This is not a serious cause of concern as it may be a false signal but it’s good to keep an eye on it. The bearish divergence would be confirmed with a failure to hold above the 21-EMA.

PDP Daily Chart Showing Bullish Momentum Extending Into June

Looking at the internals of PDP through the Renko chart type, we have a clearer view. The Renko bricks are green and moving higher with the ETF trading above its 21-EMA, 50-SMA and 500-SMA. It also pushed over Supertrend resistance, causing it to flip. The momentum is also looking good. The RSI is trending higher and above 60 and the Z-Score SMA is in an upward trend with some room to move higher. From the Renko view PDP is well positioned to continue its upward trend into Q3 2026.

PDP Renko Chart Showing Short Term Bullish Momentum

The Verdict

PDP offers a disciplined way to be exposed to verified market leaders at a time when earnings, dispersion, AI-driven capex, and trend persistence are rewarding momentum over defensiveness. While near RSI bearish divergence deserves monitoring, the ETF’s technical structure, in my view, still supports a bullish Q3 2026 bias as long as its price holds above the 21-EMA.