The rather remarkable chart below shows the relative performance of four of the major US equity indices. As can be seen there has been a steady out-performance by the midcaps, smaller caps and the large tech stocks in comparison with the "benchmark" index the S&P 500.

Why should this be and what is it suggesting about the way ahead?

Firstly, other than the S&P 500, the three remaining indices have little exposure to the financial services sector which has continued to act as a drag on the large cap indices. Secondly, the S&P 500 futures contract is the most liquid derivative for world equities and enables the large macro funds to exploit inter-market strategies tied in with major asset rotation plays. It also allows the major short sellers to tap into the fear factor as chart analysts monitor the key support levels on the S&P 500 to a far greater degree than they do on the other indices.

My underlying contention is that if things were as grim as some technical analysts contend from diagnosing the condition of the S&P 500 and financials, then it seems not to be concerning the fund managers that are steadily accumulating positions in technology and stocks outside the financial services arena.



The Nasdaq 100 (^NDX) managed to gain 1.2% yesterday despite the bouncy castle actions of the S&P 500. I shall be looking for a re-test of the 2040 level in coming sessions, perhaps even today.



The VIX has moved back to its 200-day EMA and printed a doji star formation yesterday suggesting that may be the uptick in volatility, which was to be expected, is now ready for a pause.



The sector fund for Japan, EWJ, looks constructive and echoes the technically well behaved pattern of the Nikkei 225.



The sector fund for Brazil, EWZ, shows a retreat from the recent historic highs but the pullback is coming down towards levels where new buying seems probable.



In line with my comments yesterday we saw another session where XLF is registering a hammer candlestick on an uptick in volume near important lows.



XME, which is the exchange traded sector fund for the S&P Mining and Metals index, has some very clear negative divergences.



The exchange traded fund that tracks the Canadian dollar, FXC, shows an avalanche of selling as the US dollar strengthens.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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