Small Caps and Cyclicals Showing Signs of Improving

After a wobbly couple of weeks, Technology stocks rebounded with a vengeance over the past week raising questions from readers whether Technology’s leadership will continue unchallenged. To be clear, I continue view technology as a core long-term overweight in a portfolio but there are divergences developing that continue to suggest Technology’s leadership may be in the very early stages of taking a well-deserved pause.

There are two related divergences I recommend investors and traders pay very close attention to in the coming weeks and months. The first is that while the Nasdaq and S&P Technology indices made new absolute price highs last week, their relative performance versus the S&P 500 did not. At this point they are only short-term divergence so it’s important not to overreact, but changing trends all begin in the short-term so I’ll be writing about this more in the coming weeks

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