In my column last week, I said, "Major institutions may want to look as conservative as possible going into year-end because of the carnage throughout 2008, which means they are parking their money in Treasuries and selling weak holdings. If that is happening, it could suspend a rally into the first couple of weeks in January."

Now we will have to see if that action appears as institutional traders get back to work over the next week. Although I am still hopefully optimistic about some type of rally in January, I am not seeing the action in the indices, sentiment or breadth that is needed for the market to stage a substantial rally. In fact, we are slightly overbought on several indicators.

In the chart below, for example, the 40-day moving average is nearing the overbought level and would need to drop down into the upper teens to give a strong short-term buy signal.

Percent of Stocks Above the 40-Day Moving Average TC2000

Another negative indicator giving off a bearish contrarian reading is the total put/call ratio. While major options expiration and extremely light volume has had an effect on the indicators, they are not enough to discount what the ratios are saying altogether.

The five-, 10- and 21-day averages are above their bearish trading bands. sentimenTrader.com pointed out, "This is a relatively rare event during a bear market environment. We've seen it twice since last October, those dates being October 5th of last year and May 14th of this year. Both were excellent 'sell' signals."

Put/Call Ratio sentimenTrader.com