US stock market A mega cap refuge

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US stock market: A mega-cap refuge? Factory Daily letter · 22 Sep 2026 · 10 min read

Fund flows and relative strength are again favouring mega-cap technology

Trading Strategy, Pictet Trading & Sales

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Since the recent market peaks on 13 August, the headline indices have masked a significant shift in leadership, signalling a more nuanced regime change beneath the surface of the US equity market. While the broader market has entered a period of consolidation, performance dispersion has widened markedly. The tech-heavy Nasdaq 100 has shown notable resilience, yesterday pushing to 1.3% above its recent peak. The market-cap-weighted S&P 500 is close behind, now just -0.4% beneath its previous high, supported by its concentrated mega-cap technology constituents.

By contrast, broader market participation is telling a different story. Over the same period, the S&P 500 Equal Weight Index and the small- cap Russell 2000 have lagged meaningfully, falling -4.4% and -5.8% respectively. This decoupling points to a renewed preference for large-cap growth and defensive technology, interrupting the brief summer rotation into cyclicals and small caps. As market breadth narrows and the advance–decline line softens, the concentration dynamics that characterised early 2026 appear to be re-emerging, raising valid questions about the durability of this configuration.

In today’s Technical View, we look beyond the major index levels to examine what is happening beneath the surface. We focus on the key support zones, sector rotations and internal momentum indicators that, in our view, will help determine whether recent tech resilience

proves to be a bridge to the next phase of the cycle or simply another chapter in an increasingly narrow market.

Source: FactSet financial data and analytics; Pictet Trading Strategy; as of 21/09/2026.

The divergence remains striking: market breadth continues to decelerate sharply even as equity indices trade close to all-time highs

Last week, we discussed the current state of US market breadth (link here), and the deterioration has continued to intensify. In the chart below, we focus on both long-term and short-term breadth indicators – the percentage of stocks trading above their 200-day and 50-day SMAs, respectively. The long-term indicator has fallen to a new low and dropped below 50% for the first time since April, while the short- term indicator is also declining meaningfully.

All of this is occurring while the US market remains close to its all-time high.