A subtle shift appears to be taking place in the stock market — one that may go unnoticed by anyone who follows only headline indexes like the S&P 500 and the Nasdaq-100. If you watch the Dow Jones Industrial Average or even the Russell 2000 small-cap index, however, you have probably already noticed it.

The gap between the S&P 500 and the Dow, and between the S&P 500 and its equally weighted version, has become noticeable, and it is not one that will last forever. It suggests the S&P 500 is likely to underperform for a period going forward.

A trend reversal

The S&P 500 is a market-cap-weighted index, while the S&P 500 equal-weight index is equally weighted. In the S&P 500, the biggest companies carry the most weight and can drive market direction. In the equal-weight index, every stock has the same say in where the index goes — making it a much better gauge of true market breadth and sentiment than the cap-weighted index, which is dominated by megacap technology names including Nvidia, Broadcom and Micron Technology.

The relationship between the two indexes is visible in the ratio of the SPDR S&P 500 ETF to the Invesco S&P 500 Equal Weight ETF.

The technical chart below shows the ratio has now formed what looks like a “triple-top” reversal pattern. Depending on how it plays out, it could signal a much bigger, longer-term change in the market trend.

Since late 2025, the ratio has stalled three times around 3.6 to 3.7, meaning SPY’s price has hit a ceiling at roughly 3.6 times RSP’s price. Before that, the ratio topped out near 3.4 in both 2024 and 2025 before finally breaking above that level.

The biggest question now is what happens if the SPY-to-RSP ratio falls back below 3.4, and below the neckline of the triple top? It could mean the equal-weight index is due to outperform SPY for some time longer.

Photo: TradingView

A similar relationship shows up in the ratio of SPY to the SPDR Dow Jones Industrial Average ETF. The Dow uses a different weighting methodology than the S&P 500, so even though many of the same names appear in both indexes, the megacap technology stocks don’t carry the same weight. For example, Goldman Sachs and Caterpillar have the two largest weights in the Dow, while Nvidia and Apple have the largest weights in the S&P 500.

This has led to steady gains in the SPY-to-DIA ratio in recent years, with the ratio even surpassing the highs seen during the dot-com period of the late 1990s.

Photo: TradingView

On the surface, this suggests that the technology stocks that have helped lead the S&P 500 higher may lag the broader market in the weeks ahead. The only downside is that we don’t know what form that will take. A ratio only suggests SPY is likely to underperform, which could mean it falls faster, rises more slowly or moves in the opposite direction.

However, if technology and the AI-related theme outperformed and drove the separation between the indexes, it’s reasonable to expect those same sectors to lead the S&P 500’s underperformance.

Implied correlations

Another way to view this is through the Cboe 3-month Implied Correlation Index, which has been historically low. That is another way of saying that individual stocks have been trading independently of one another. If the technology group begins to underperform while the rest of the market holds up, stocks could start trading more closely together, and correlations could rise.

What stands out is that implied correlations have been suppressed since January 2023, around the same time SPY began to outperform RSP. Rising implied correlations have also usually been a bearish feature, coming as the S&P 500 moves lower.

Photo: TradingView

So, over the next several weeks, if stocks start trading together more often, we should see implied correlations rise and the SPY-to-RSP ratio decline. In other words, the stocks that took the market higher are likely to be the stocks that take it lower.