Very quietly, in an almost sneaky fashion, the Nasdaq has been movinghigher. When did these guys decide to join the party?

Well, that may be abit of an overexaggeration, as it has been moving higher with the other major indices. In fact, the year-to-date performance of the Nasdaq is actually better than that of the

S&P 500


Now, the Nasdaq is a more volatile index, but performance is performance, and based on the focus on everything outside of technology, it's a bit surprising you would have done better to own the Nazz than the S&P.

All you have to do is look at the year-to-date performance to see this market has been focusing on the leadership areas like steel, copper, coal, energy machinery and rails, rather than technology, except for a few select turnaround stories or niche players. This may be changing, but what has been missing is the thematic catalyst to get the technology engine running.

It may be the fear of higher interest rates. Technology, with high growth and low debt, is a more attractive candidate when interest rates are rising. It may simply be that basic-materials stocks are extended and have rich valuations, leading participants to look for alternatives. Whatever it is, things are looking up for technology.

One way to see this improvement in an objective fashion is by comparing the Nasdaq's relative strength against the S&P 500. The Composite's performance has been equal to or better than that of the S&P 500 over the past six months. That's not a huge time frame, but as the expression goes, a journey of a thousand miles begins with a single step, or in this case, a few months of outperformance.

The greatest contributor to this outperformance has been the Nasdaq 100 stocks. These stocks have been moving higher, leader and laggard alike, in recent weeks.


(INTC) - Get Report

may be one of the best examples. The semiconductor space has been mixed, but Intel has been pushing steadily higher and recently made an 18-month high. That's right, it's at its best levels in 18 months.


(DELL) - Get Report

, with all its issues, has also been showing signs of life and has rallied 25% from the March lows. More importantly, the stock has broken the long-term downtrend, suggesting the stocks are no longer being distributed.

These stocks have been building bases for many years as they have moved into relative obscurity while other areas have taken over the leadership roles. This isn't a bad thing, because it is not uncommon for stocks to have long periods of consolidation after a bear market. It lets these issues rebuild and accumulate. Technology is hated, and there has not been a catalyst to get it going. These bases will provide great support when that occurs.

At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.