Small Caps and Brazil

A coupe of interesting things I've noticed in the market. First, large cap stocks have made new rally highs, besting their highs from October. Small cap stocks have not. This is considered to be a negative divergence and not generally a positive sign. You can see in a chart comparing the DIA and SPY (the ETF of the Dow Jones Industrial Average and S&P 500 respectively which are considered large cap) to the VB (the Vanguard Small Cap ETF) that VB has not been able to top its high from mid October while DIA and SPY have both reached newer highs.

SPDRs (SPY)">

Second thing to note, The Economist magazine recently put Brazil on the cover with the title "Brazil Takes Off." When a stock, sector, country, etc. makes the cover of a major magazine like The Economist or Business Week, that generally is more indicative of a market top to that investment theme than the beginnings of one. There have been statistical studies that have shown this to be true. Brazil still looks strong at this point but keep a closer eye Brazil related holdings in case it should falter.