We are less than 2 percent from four-year highs in the U.S. stock market. Three-month highs in the S&P 500 index, better than 10 percent off the June lows.

Can we break out even more? The four-year closing high in the S&P 500 was 1,419 on April 2; that's only 25 points away.

For that to happen, a very important rotation needs to take place: Out of dividend payers (telecommunications, utilities, and pharmaceuticals) and other defensive names, and into the global growth names (materials, energy, industrials) and financials.

Those dividend payers have been market leaders for much of the year. Since the beginning of August, however, that leadership has inverted: The leading sectors this month are consumer discretionary, technology, materials, and financials. The dividend payers — health care, telecom, and utilities — are either flat or down for the month.

Europe: The Monti/Draghi axis is ascendent. Much of the gains in the U.S. markets are due to more stability in Europe. Four-month highs in Germany. The euro bouncing off its two-year lows in July.

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