The S&P 500 Cap-Weighted Index ((IVV))  has been showing signs of wearing down for some time now, stubbornly bouncing between the 1850-1900 levels while also coming perilously close to breaking the 50-day moving average. The market technicals may finally be catching up to what the economy and the market fundamentals have been telling us. The S&P 500 is up only 2.39% 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 in the last decade. Since making new all-time highs just a week ago, the index is also in a state of stasis, stuck in a tight range. The index is up 3.13% year-to-date, slightly better than the cap-weighted index.

One of the themes for the past few years has been growth-oriented, smaller cap stocks outperforming  high quality, blue chip stocks. That trend has reversed dramatically this year. The Russell 2000 Small Cap Index ((IWM)), the best performing major domestic index in 2013, is down a striking 4.77% YTD. After years of investors disregarding risk aversion in favor of returns, this index is finally taking a beating, breaking 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, and finds itself above both moving averages. 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 is up 2.08% since the beginning of the year, on par with the US market.

The MSCI EAFE Small Cap ((SCZ)) has performed significantly worse, with a YTD return of 0.26%. In similar fashion to the US markets, international small caps are breaking down faster than the large cap index.