Note the Negative Divergences

Let's go through some statistics.

First of all, the market is overbought.

In addition to being overbought, the New York Stock Exchange oscillator is at a lower high.

That is a clear-cut negative divergence.

When an indicator makes a lower high while the underlying index makes a higher high, you have a negative divergence.

I'd pick on the Nasdaq, but because it hasn't made a higher high, I can't call it a negative divergence. But still, there's no higher high in the oscillator here, either.

The 30-day moving average of the advance/decline line does not have the same negative divergence. In fact, it has made a higher high. I'd have to go all the way back to December 2004 to find a reading this high in this indicator. So bulls can take heart in the fact that there is no divergence here.

On the other hand, bears will note that December 2004 was not a time to be loading up on stocks, but rather to be selling into strength. The market peaked in late December that year and didn't bottom until late April. But this indicator is now maximum overbought.

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At the time of publication, Meisler had no positions in any of the stocks mentioned, although holdings can change at any time.

Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.