Stock indices showing divergence

Last Friday, the Dow Jones Industrial Average hit 10,940.55, its highest close since June 2001, while the Standard & Poor's 500 index hit 1,222.12, its highest since July 2001. The Nasdaq composite, in contrast, closed at 2,070.61, almost 5 percent below its high in December 2004.

This divergence is troubling to me, because divergences often precede market reversals. Is the current divergence indicating a potential reversal of the US stock market? I discuss this in today's commentary entitled "US stock market bullish but divergence and valuation are concerns".

Incidentally, this divergence isn't restricted to the US market. If anything, it is even more pronounced in Singapore, where the main Straits Times Index is near its highest level since 2000 while the smaller Sesdaq is 32 percent below its peak hit in October 2003.

The divergence between the STI and Sesdaq may not have any direct relevance to the US market, but it may have much relevance to the Singapore market itself. More on this later.