Stuck in a Range

In all honesty, yesterday's trading was a lot of sound and fury, signifying nothing. The same way there was no buying pressure on Monday, there was no selling pressure yesterday.

To me, all yesterday's action did was take back Monday's up day, and in doing so it managed to get all those newfound bulls from Friday and Monday and turn them into bears. So quickly! The total put/call ratio once again moved right up over 100% yesterday. Clearly folks didn't have much conviction in their bullishness, did they?

And now we stare at the beginning of a new month. Only this time, the new month arrives on the day the ADP employment report comes out and the day before the monthly employment report. Which also happens to be the day before the holiday weekend! Is it any wonder folks are bullish one day and bearish the next?!

And did you see the folks at CNBC chatting up the head-and-shoulders top? I'm sure we should fade them, but then again last week they were chatting up the potential head-and-shoulders bottom and the golden cross buy signal. Perhaps they are as confused as the options traders!

I have been asked about the Dow Transports and their inability to make a higher high. Some folks consider that a Dow Theory negative divergence. One thing I would note is that the Trannies are not dissimilar from the Industrials: The high was made in June. Thus far neither one has gone on to a higher high, so where is the divergence? They are moving in tandem, aren't they?

To me, the Transports look like all the other indices -- stuck in a trading range for two months now. Since early May when the market started building this sideways move, we've been stuck. I don't know what it is going to take to move us out of this range on any of the indices, but it seems to me that the bulls think there is a ton of money sitting on the sidelines waiting to jump in, and the bears think the market is being manipulated on the upside.

My view is that we had a great rally off the March low. I thought it should have corrected in late April, and I was wrong -- it didn't. But when we look back two months later, we can see that in fact the market basically stopped going up in early May. We would have been better off had we had a proper correction, because that might have given us the oomph and the shakeout needed to push higher. Instead, we're stuck with no buying pressure and no selling pressure.

In the meantime, based on the heightened put/call ratio I suspect we'll see some sort of early-in-the-month rally before we work off that upcoming overbought reading.

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For more explanation of these indicators, check out The Chartist's primer.

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Know what you own: Meisler mentions the Dow Transports. Companies on the index include Burlington Northern Santa Fe (BNI - commentary - Trade Now), Continental Airlines (CAL - commentary - Trade Now), CSX (CSX - commentary - Trade Now), FedEx (FDX - commentary - Trade Now), JB Hunt (JBHT - commentary - Trade Now), Norfolk Southern (NSC - commentary - Trade Now) and UPS (UPS - commentary - Trade Now).

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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.