…this is a very important development to watch. One of the most egregious problems investors have faced over the past six months is that all asset groups, classes, sectors, regions and commodities have traded down in synch. The financial statisticians' way of saying this is that all correlations have gone to 1.0.

Now that we can see the Russell 2000 has surpassed its Dec. 8 and high and its 50-day average, it provides us with some hope that the new differentiation that I have spoken of in recent weeks is finally playing out. The S&P 500, Dow and Nasdaq have all failed to spend more than one day over their 50-day average, and none is above its Dec. 8 highs.

Sectors Fairing Better Than Others

Some sector groups have also eclipsed their Dec. 8 highs and 50-day averages. They include three to which I have recommended exposure: Global Telecom (IXP), Metals and Mining (XME) and AgriBusiness (MOO).

Groups that are have not, and to which I have recommended no exposure, include energy (XLE), finance (XLF), technology (XLK) and industrials (XLI).

The only way to beat the market is to avoid what's not working and own what is working. In short, always fight with the winning side. Now that includes small caps, telecom and agriculture.

What's wrong with large caps? One of the main issues is that credit remains tight despite the Fed's incredible efforts to loosen them up. Junk bond spreads narrowed by 38 basis points on Tuesday of last week, for instance, which sounds good until you realize that they had widened by 52 points the prior day.

Independent debt analyst Brian Reynolds also reports that the prices of bank loans — those credits at the top of the capital structure, meaning they get repaid first in the event of bankruptcy — did not improve last week at all. His reading of the action leads him to think that the bear community, which is extremely well-funded after having eaten sumptuously all year — is just laying low right now as it waits for stocks to move higher.

He believes that the 1,050 area of the S&P 500 would be the likely planned kill zone, and that if stocks somehow get through that the bears would regroup at around 1,075 and retreat back to the 1,210 to 1,275 area before launching a renewed attack with all they've got. I believe that battle plan is right on target.

I'll keep monitoring this for my Trader's Advantage subscribers, but keep a battle map of your own as well.

This article was written by Jon Markman, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.