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Short-term Trend: Small Caps Lead and Tech Lags

|Includes: DIA, IWM, QQQ, SPDR S&P 500 Trust ETF (SPY)

Since last Monday's bullish Percent R Retest the S&P500 (NYSEARCA:SPY) has rallied back to make new highs for 2009.  The low risk entry point was correctly forecast by Price Headley in his Weekly Market Outlook Video, but it was the mechanics of the 4 day rally that interest me...   In recent days financials have seemingly led the market; however, a closer look shows that small capitalization stocks have led this market in recent weeks.  In addition, the leading index for 2009 has been the weakest since the start of August.  


Take a look at the 3 charts below and take note of the recent weakness in tech and strength in small caps.  The final chart looks at the year-to-date performance, which highlights the extreme outperformance of the QQQQs.  Bottom line, in the bigger picture the NASDAQ 100 (QQQQ) is outperforming, but recent strength in the Russell 2000 (NYSEARCA:IWM) exposes a strong trend worth noting.  In my view we'll start to see the divergence between the NASDAQ 100 and Russell 2000 begin converging, the question is which direction will both move after closing at yearly highs on Friday?  Sound off below in the comment section.

5 Day Relative Performance - SPY(Blue) , QQQQ (Red), DIA (Green), IWM (Yellow)


15 Day Relative Performance - SPY, QQQ, DIA, IWM


YTD Performance - SPY, QQQQ, DIA, IWM