Sunny skies, but some grey clouds are moving in....

The recent stock market advance has been a healthy one, meaning it has generally been confirmed by market internals and other such indicators.

Source: Stockcharts.com

The chart above shows that the S&P 500 Index has successfully broken through the rising trend channel as key moving averages remain upward sloping.

The NYSE A/D line, perhaps the most popular market internal measure, recently hit a new high, confirming the S&P 500's new high:

Source: Stockcharts.com

I remain bullish on the market, however I am a bit concerned about some potentially bearish signs that either have appeared or are developing. The chart below shows the weekly S&P 1500 New Highs-New Lows Percent (lower inset) with the S&P 500 (upper inset): 

When this percentage (new highs minus new lows divided by total issues) has surpassed 20 on a weekly basis, it has generally indicated that the market advance has become overbought and is due for a reprieve.

I've discussed in the past the relationship between the stock market and UST yields, namely that they tend to be positively correlated. A falling UST note is generally coupled with the stock market rising.

That said the chart above highlights an inverse head-and-shoulders pattern for the 10-year UST note. In isolation, this bullish formation does not bode well for equities. However, although this may be true in the near-term, I've also discussed in the past how the 10-year UST looks to be in the midst of a longer-term, complex head-and-shoulders breakdown.

The chart above highlights the bearish complex H&S formation with the neckline breakdown at 127-128. Also note the rolling 100-day correlation between the S&P 500 and the 10-year UST price -- over time they tend to have an inverse correlation. 

As I wrote in a prior post, "I do expect the neckline to hold and for the UST to roll over, however if the 10-year climbs through $127 meaningfully (beyond $128), it would require prompt reassessment with equities likely feeling the brunt of it." I stand by that statement.