Is there trouble brewing in Paradise?

There is a trememdous lag developing between the DOW index and the S&P 500. Notice how we are at new highs on the DOW, yet are quite a ways behind the old highs in the S&P 500.

This is a bearish sign for the indexes. I have been looking for a rally all year and we have finally seen one. I had been expecting it to happen later in the year. Maybe this big divergence means we will see a drop off into the fall setting up the real buy point. Notice how closely correlated all the way up to the 2000 high these two indexes were, which is the relationship that should be in place.

However, with the bond market as strong as it has been, a large selloff is not likely. Hopefully this divergence sets up enough of a drop to give us a good long entry for the rally into the first quarter of next year.