This market is becoming truly divergent as the number of negative indicators and their strength is increasing, but $SPX prices (and those of other indices) have not broken down, nor has volatility ($VIX) increased. The latter ($SPX and $VIX) are more important than the former -- at least for now.
The $SPX chart remains bullish. It is still well within the rising channels (marked in blue on Figure 1) -- both the wider channel (dating back to April) and the narrower one (dating back to July). The Index remains above its rising 20-day moving average.
Equity-only put-call ratios have curled upward this week, as the broad stock market has backed off somewhat. This has resulted in the computer analysis programs grading the weighted ratio as a "sell," but not the standard.
Both breadth oscillators remain on sell signals. Typically, when $SPX is breaking out to new all-time highs, we expect to see the breadth oscillators expanding into very overbought conditions. That did not happen, and as a result, there is a distinct divergence from the breadth oscillators and the performance of $SPX.
Volatility is not divergent. In fact, it's been steadfastly bullish for quite some time now. As long as $VIX remains below 15, it's not a problem for stocks. We really don't need to get more complicated than that.
In summary, for now we remain bullish in line with the $SPX and $VIX charts. However, we are certainly not ignoring the divergences.
In short, we remain bullish until there is some violation of support on the $SPX chart.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.