The S&P 500 Cap-Weighted Index ((IVV))  has finally been showing signs of wearing down this year, breaking through support at the 1850 level and then its 50-day moving average this past week, while also coming perilously close to breaking the 1815 level. Are the market technicals finally catching up to what the economy and the market fundamentals have been telling us? The S&P 500 is now down 1.21% for the year after making new all-time highs just a week ago.

The S&P 500 Equal-Weighted index ((RSP)) is set up so that every stock in the index has the same weight, thereby eliminating market-weighting’s growth bias. As a result, the index tilts more towards mid-cap and value stocks, which accounts for much of the out-performance versus the cap-weighted index this year and in the last decade. Since making new all-time highs just a week ago, the index has also hit a rough patch, breaking its 50-day MA as well, but falling at a slower pace than its cap-weighted counterpart. The 69 level is key. The index is down 0.33% year-to-date, slightly better than the cap-weighted index.

As evident by the long-term out-performance of the S&P Equal-Weighted Index, one of the themes for the past few years has been growth-oriented, smaller cap stocks outperforming  high quality, blue chip stocks. The trend may be shifting very soon though, as the recent performance of the S&P Mid Cap 400 Index ((IJH)) can attest to. The index is down 1.35%, more than the overall market.

The Russell 2000 Small Cap Index ((IWM)), the best performing major domestic index in 2013, is down a striking 4.04% YTD. After years of investors disregarding risk aversion in favor of returns, this index is finally taking a beating, reaching support at the 200-day MA. Low quality or speculative smaller-cap stocks tend to lead the market near the end of a bull phase. We’ll keep an eye on this.

The MSCI EAFE Index ((EFA)) is holding up better than the US markets, according to both the technicals and fundamentals. Since October, the index has trade in a steady range, but has generally trended higher. Although it’s at risk of a double top, the index still finds itself above both moving averages and in the middle of its trading range. The outperformance is mostly due to the weakening US dollar, but may also be a result of the world recognizing that better relative growth prospects may lie in Europe and not the US, surprisingly so.  The index now finds itself at its short-term uptrend and must bounce off this level if it wants to continue its run. The index is down 1.24% since the beginning of the year, on par with the US market.

The MSCI EAFE Small Cap ((SCZ)) has performed significantly better, with a YTD return of 0.12%.