DUAL OF THE 3s

Call it a dual of the 3s with the S&P 500 up 3% and the Russell 2000 down 3% so far on the year.

How that dual plays out is anyone's guess. But for now the big question is does it represent a true rotation away from last year's fast growers to this years bigger, perceive-to-be safer companies.

It's a question on many investor minds these days. It's also part of the schizophrenia of this market. For many small caps are a proxy for the US economy since most do very little beyond US borders. Just maybe last year, the year of small caps, wasn't predicting bigger, better economic times ahead for this year. Thus reality sets in.

With very little effort you'll find strong opinions on both sides, a brief respite before small caps get their second wind or the lull before the storm. On a valuation plane small caps appear expensive. The Russell 2000 changes hands around 18 times forward earnings. For the last 35 or so years that average has been mid-way between 15 and 16 times earnings.

Another possible negative is small caps offer little in the way a storm port since, unlike their big brethren large caps, most pay little if any dividends. And like it or not dividends have held center stage for a long while now.

So the vigil continues.