The two large-cap indices, $SPX and $DJX (the Dow) have moved to new all-time highs. But now $NDX is falling behind, and the Russell 2000 ($RUT) has been lagging badly all along. Of ourse, this pattern -- or similar ones -- has been in effect since mid-June (and really, even before that in the case of the Russell). As a result, negative divergences persist, but they can last for a long time even while $SPX is merrily moving to new highs.
On the surface, everything appears fine: $SPX made a new closing all-time high twice this week once after a swift upward reversal off of support near 4370. However, it has not made a new intraday all-time high since July 29th, so in reality it is trapped in a very tight trading range between 4370 and 4430 (the all-time highs) A breakout of this range in either direction should give the Index some short-term momentum.
As $SPX has recovered from its July 19th lows and driven to new all-time highs, not a lot has changed regarding the overall picture. It's still the big-cap tech stocks leading the way, as the NASDAQ- 100 ($NDX; QQQ) and Dow ($DJX; DIA) are near all-time highs as well. But the internals of the market are still weak as manifested in the Russell 2000 Index ($RUT; IWM).
Leadership once again is in the $SPX Index, although the NASDAQ Composite and the NASDAQ-100 ($NDX; QQQ) are strong as well. Since the $SPX chart is our primary indicator, we retain a "core" bullish position as long as $SPX holds above support: 4260 (the early June highs), 4165, and 4060 the latter two being the twice-tested lows of June and May, respectively.
When $SPX broke out to new all-time highs in early June, it seemed labored, and that breakout quickly faded. But now, in late June and early July, $SPX has moved to new all-time highs with more authority -- having closed at a new all-time high for the sixth trading day in a row.
The broad market ($SPX) has failed to convincingly break out to a new high, and now it is back below the old (early May) highs of 4238. A close below 4190 would indicate to me that the attempted upside breakout had failed.
Despite recent market weakness over the past four days, the equity-only put-call ratios remain on buy signals. The standard ratio (Figure 2) flattened out yesterday, but the weighted ratio continues to drop. These ratios will remain on buy signals as long as they are declining.