July is when the advance-decline line stopped making new highs ... well, actually it was June when that occurred, which is why July's high was unconfirmed. But my point is that we basically have been in a bear market since July of last year.

I don't care that the DJIA or the S&P or whatever other average isn't down by some required 20% number.

I care that the advance/decline line is now 18% below its high of last year. I care that it continues to make lower highs and lower lows. I care that the 200 day moving average lines of the major averages are all heading downward. I care that the options ratios continue to show a high level of anxiety, but not a high level of fear.

I also care that we are now quite oversold. So I went back to look at the last time we had nine out of the last 10 days with a negative advance/decline line, and lo and behold, it was in November. You might recall in Monday's column I discussed November's rally -- the VIX refused to get jumpy then, too.

Now we have yet another similarity to November.

So I went back and looked to see exactly how that late-November rally (which really was an awful rally) unfolded. On the chart below, you can see I've put an arrow on Nov. 23. Keep in mind this was right around Thanksgiving, which makes this another commonality: holiday time in the U.S. So we got a one-day rally on the 23rd, which was followed by a really ugly day and then the rally came. And despite what it looks like on the chart, you might recall it was a poor rally with volume lacking and new highs faltering.

I don't know if this one will unfold as that one did, but it wouldn't surprise me if it turned out that way (a rally that lasts one day and gives it right back). In fact, what I recall about November was that I, along with everyone else, was expecting a rally for Thanksgiving and the rally didn't come until well after Thanksgiving. Sound familiar? Sure does to me; everyone -- myself included -- is either waiting for the VIX to jump before they buy or they are waiting for an oversold rally.

I do know it is extremely rare for the advance/decline line to be so negative for so long with no relief on the upside. But I'm going to keep that November template in mind for the short term.

Overbought/Oversold Oscillators

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