MTU Weekend. Ed. -The 9% and the 90% (10/23/15 close)

SP500 returned to its previous topping zone following a gap above the critical resistance (Chart 1). We count the current upswing from the September low as wrapping up wave A (green), wave 3 (green), or wave [v] (blue).

Whether this is the start of wave five off the 2009 bottom or a counter trend rebound (even if there is a minor new high) is the obvious question. We cannot help noticing the exceptional strength in large-cap stocks (the 9%) vs the rest (the 90%) (Chart 2). At the moment, the midcaps and smallcaps have only recovered 50% of the their lost ground and are still below their previous topping zones. This divergence is likely to end soon, as a result of either broader participation in the rally or an underperformance of the large-caps (or worse).

With respect to the 2009 bottom, the current upswing is consistent with the top scenarios highlighted in Chart 3.