The S&P 500 Cap-Weighted Index ((IVV))  has finally been showing signs of wearing down this year, breaking through support at the 50-day moving average these past few days, while also coming perilously close to breaking strong support at the 1770 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 down 3.49% for all of 2014.

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 two weeks ago, the index has come crashing down, and seems poised to continue its run down to the 200-day MA. The index is down 2.96% year-to-date, slightly better than the cap-weighted index.

As evidenced by the 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. That trend is also seen in the performance of the S&P Mid Cap 400 Index ((IJH)), as the index is down 2.19% YTD, better than the overall market.

The Russell 2000 Small Cap Index ((IWM)), the best performing major domestic index in 2013, is down 2.77% YTD. After years of investors disregarding risk aversion in favor of returns, this index might be in for some trouble. 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 lagging behind the US stock market, given the well-known and widely-reported circumstances in Europe, the currency problems in commodity-centric economies of Australasia, and stunted growth in Japan. Since October, the index has staggered, falling below its 50-day moving average while also forming a series of lower highs. It now finds itself in a short-term downtrend and under major support at the 64 level. It is down an unhealthy 5.19% in the last month alone.

The MSCI EAFE Small Cap ((SCZ)) has performed significantly better, with a YTD return of -2.77%