Divergence

The indexes ended this week with some subtle divergences across the board.

First, the SP established a lower high on a closing basis:

SP 07/20/12

Secondly, the NASDAQ did not:

COMP 07/20/12

Third, the Russell which had a short period where it outperformed the other indexes failed to establish a lower high this week and lagged as well closing the week down 1.18% overall:

Russell 07/20/12

   This underperformance shows up more clearly when compared to the SP:

$RUT:$SPX

Additionally some of the long time IBD darling stocks have taken some clear hits this week as well.

So far a consistent theme has been the indexes getting some traction for 4-5 days before pulling back. Thus far the higher lows have held and as long as they do I'll view this as positive. It's becoming evident this earnings season that there is still some excess to flush out as indicated by the number of stocks that are getting their wings clipped, particularly the old guard IBD type leader stocks that have held their ground the longest. AAPL reports Tuesday and I suspect they'll be anything but stellar so it's my view that market reaction to this will be very important given the divergence that occurred this week during what has thus far been a muted rally.

$COMP