Here are three charts, one of SPY, the other QQQ, and the last is IWM. Take a look at each of the candles highlighted in the green boxes. Notice on that month, we saw a harsh decline in all three indices, but IWM behaved differently.

We talk about the catch up trade for small caps and the great rotation out of mega caps into smaller companies. Although there is money flow allocation throughout these indices, how sustainable is it? If we look at 2008's rotation, small caps saw an incredible increase in demand before turning back the other way. IWM hit an all time high before ending the month at a major loss. It seemed that the big names fell initially, but small caps suggested there was a rotation going on. This only took investors by surprise when everything dropped, and the rotation was not within the market, rather, it was just completely out of the market.

They say history doesn't repeat itself, but it can rhyme. This time around, the SPY is still green, but the QQQ is turning red on an inverted hammer candle for the month (pretty bearish sign should the candle close in that fashion, but we still have a few weeks left in the month).

IWM, however, looks like it's doing the same thing as that September in 2008. Maybe the small cap index touches new highs, or maybe it pulls back like the big tech market. The reason I'm watching these market with caution is because this "catch-up" trade that everyone is so eager to be in, could be a trap.

I think it's reasonable to finally see the small caps finally moving with the rest of the market, but it could be the last part of this melt-up before some kind of correction. Time will tell as the month wraps up.