FOOD FOR THOUGHT

The chart above shows an interesting change in the markets that began around the end of November. No, not the long awaited outperformance of the big caps but the outperformance of the SPX over the NDX.

Since the lows of July 18, the SPX is up 16.5%, the Russell 2K is up 18.9% and the NDX is up 21.9%. So the NDX has been the best performer since the summer bottom but now the NDX is lagging and it may be giving a heads up of some future underperformance by the other major indexes as tech and the NDX led on the way up and probably will lead on the way down.

In addition the SMH, the ETF proxy for the semiconductor stocks, hit its high way back in mid October at $35.95 and has since fallen back 6.1% to $33.75 yesterday. And the semis are supposed to lead the markets.

Barry R on his blog also notes the recent NDX lag and in addition mentions that yesterday was the last day for mutual funds to buy stocks that will show up on the books on the 2006 year end financial statements. So just maybe a little window dressing yesterday and Tuesday. FWIW.