NEW YORK (The FRED Report) -- One of the questions on everybody's mind is the events in Egypt, and how that will affect the markets. Most of the responses we have seen have dealt with that question. As technical analysts at The FRED Report (, we have our own "take" on this, which we will discuss below.

We believe that this bull market has further to go, but the SPY has hit upside targets at 130, and the rally is starting to look a little tired. Breadth indicators have shown less and less momentum over the last few weeks.

A pullback, and fresh buying opportunity, could occur by the end of February. The Egypt crisis has accelerated one of our themes for 2011, which is money is likely to move out of the emerging markets area and back into the U.S.

. We show charts below that EEM and EFA have started lagging the SPY.

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When foreign money comes into the U.S. markets, it generally flows first to large-cap, household names. This may be one reason breadth indicators have started to lag. While mid-caps still look attractive, the small-cap stocks look less so. We would tend to de-emphasize smaller cap names. In a recent article, we noted that mid-cap stocks hit all-time highs. This is normal after recessions, but the transition to larger-cap names might take a bit less time than it did after other recessions.

One other area of the markets that has been affected is commodity markets, particularly oil, which has rallied (Oil normally has a seasonal decline from early February to spring, then rallies in the summer). In turn, this has affected interest rates short-term, but rates may rally as the crisis abates.

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So far, the markets are not treating Egypt as if it is a serious problem for the Middle East, but that could change, and change quickly. What seems prudent at this time, for people who want to invest right now, is to invest in attractive, large-cap names -- and slowly, in case we see more volatility over the next few weeks as the Middle East (hopefully!) settles down.

Fred Meissner is founder and publisher of

The Fred Report

. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report. A detailed bio is here:

Fred Meissner