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The Lead-Lag Report: Emerging Rotation

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While corrective risks remain in the US, the rotation in emerging markets appears to be getting started in a very real way. Could this be the early set up for the Fall Catalyst of 2012 of new all-time highs led by overseas assets?

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Small-Caps (SLY) – Support?



Comments: Small-caps continue to underperform, nearing a relative support line. It remains to be seen if support can hold, but this relationship is an important one to focus on. A breakdown would be an important event which could mean the top is in for markets.

Technology (XLK) – Crash



Comments: Technology has essentially crashed relative to the S&P 500 (INDEXSP:.INX) on Apple (NASDAQ:AAPL), IBM (NYSE:IBM), and Google (NASDAQ:GOOG) earnings news hitting mega-cap companies. The trend remains down and severe weakness could persist into earnings season.

Conclusion

Rotation into emerging markets continue to be the most bullish part of intermarket trend analysis now, as the U.S. appears more likely to correct than overseas risk assets. The shift into emerging markets is important to pay close attention to independent of how deep U.S. equities can go in the very short-term.

Editor's note: This update is published every week exclusively for Minyanville, and is compiled by Michael A. Gayed, CFA, Chief Investment Strategist of Pension Partners, LLC.

Twitter: @pensionpartners
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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