Technology stocks housed largely in the Nasdaq Composite index continue to flash notable weakness. On the other hand, materials, financials, energy stocks, and even the transports are showing relative strength again. These theme continue to emerge, diverging from one another.

In some respects, I am letting this continued consolidation play out. The S&P is still above its 1430 lows from late-September, even though the Nasdaq is making new lows. While far from inspiring, the action is not quite as nasty as bears would have you believe. We have been expecting leaders like Apple, Google, etc. to pull in for a while now. The true test of mettle then becomes if the rotation to other sectors continues to materialize.

As I pointed out on my video recap yesterday, though the action in the Nasdaq is weak, the 50-day moving average continues to clearly rise. Indeed, the slope of the reference point tends to outweigh whether price undercuts it for a day or two. Over the long run, I like playing with the odds in my favor, regardless of a given short-term result. With that Nasdaq now marginally below its 50-day moving average, it is likely that downside is limited from here.