Is Wall Street too bullish?

With stocks seesawing since the start of the year, earnings season has taken on more importance as a guide to stock market value. As a result, some big caps have been stumbling.

So the adage "As January goes, so goes the year" has created some concern among traders who see the swings as signaling a negative outcome. But when considering where the market is heading, it's worth taking a look at small caps, a group that has been outperforming recently.

The Dow has felt the brunt of high-profile earnings pain, with big names like IBM, Intel, Johnson & Johnson, General Electric and Verizon delivering a blow as they declined on disappointing earnings news. The Dow is off 1.2 percent since the start of the year. The S&P 500 was off just 0.2 percent Wednesday afternoon, trading just a few points below its Dec. 31 close of 1,848.

But the Nasdaq and small cap Russell 2000 tell a different story. They are up 1.6 percent and 1.4 percent, respectively, since the new year. While the market has churned sideways, the Russell has been doing what small caps are expected to do in January—outperform—creating a "January effect" driven by new money coming into the market.

"Small stocks have been up," said Richard Bernstein, CEO of Richard Bernstein Advisors. "Part of what's happening in large cap land—multinational exposure is hurting them. The market is starting to recognize the difference, that whatever is going on here in the United States is healthier than what's going on in the emerging markets."