There are many ways to interpret market action. Some like to analyze the indicators and determine if there are divergences or congruence. The appearance is not so clear, and the more we analyze the more difficult it is to come to a conclusion. That's right, sometimes less is more! We have to start somewhere and have some sort of anchor so we don't sway to far in our analysis. That anchor is the price action.
But is price action the best and only way to interpret the current condition? Arguably I would say yes, but it's nice to have other indicators chime in and agree with the price action. Looking to the chart, we can see very clearly the bullish price move since the late March bottom. For information, we don't pick at bottoms, rather wait for higher lows and trends to establish before declaring some sort of 'all clear' signal. Even then, there are landmines to avoid.
Do we ignore the divergences? No, we do not. Rather we acknowledge them, put up a yellow flag and proceed with caution.
Back to the indicators. The current price chart is strong but some supporting indicators are wobbly. Take the put/call ratios, which have been declining for months but are starting to rise up. When that occurs, more puts are being bought on a regular basis and until there is a panic this indicator could be considered bearish.
Breadth has been a common complaint among those looking for a confirming indicator. It wasn't long ago the breadth indicators were hitting all time highs. Could we agree that in July the markets were too hot and were deserving of a cool down? New highs are still dominating new lows, albeit at a lower level than in July. That's fine here too, as long as the breakdown is not severe.
Divergences are important, but it's the trend that matters most. On a medium term horizon we have moderate divergence with issues starting to decline from above the 50 ma. This has been happening for a couple of weeks and with bears watching. If stocks are not going up, they are going down.
Finally, the talk about a few stocks pushing the indices. I don't see that happening right here and now. Frankly, it's those who are not engaged in the market who are complaining about those two troublemakers, Apple (AAPL) and Tesla (TSLA) . If you look around you will see sector improvements in housing, retail, discretionary, construction, metals and various technology and biotechs, along with gold and silver.
Look objectively and without a biased opinion. You'll see the markets are pretty healthy here and may continue on. If the price action starts to falter though, we'll have to change our course of action. But for now, it's still GAME ON.