Positive Indicators Peeking Through

As per Wednesday's column, breadth made a higher high while the S&P 500 lagged. I consider that good news.

I also like the fact that the market shrugged off bad news Wednesday in the form of Research In Motion's (RIMM - commentary - Cramer's Take) disappointment as well as the economic numbers. And what's more the put/call ratios were relatively high as well. We had the total put/call ratio over 100% and the index put/call ratio at 148%, the highest it's been since the lows in the market a few weeks ago.

We do, however, need to keep our eyes on the International Securities Exchange call/put ratio since that gave us a good sign for Monday's decline when it scooted up to 137%. Wednesday's reading was 130%. I'm not quite sure where to put that since in the past a reading around 130% hasn't been bearish. So let's say a reading over 135%, especially if it were accompanied by a drop in the Chicago Board Options Exchange's put/call ratios, would turn me near-term cautious.

Perhaps I ought to rephrase that. We are heading toward an overbought reading as you will see on the chart below. I have discussed the potential for the market being overbought all week and it will arrive in the next few days.

There is some good news involved with this: If the oscillator can make a higher high in here then the decline we get off the overbought reading ought to be moderate. I'd expect a moderate decline in a normal, non-volatile market. But in this market we're probably unlikely to get one!

I would also remind folks that the 50-day moving average is still declining. The S&P's 50-day moving average is currently at 950 and falling fast. Within two days it ought to be closer to 930, no matter what the market does. It is a rare event that the index gets to the 50-day moving average line for the first time in months and flies right though. It is more common for it to back off the first time it kisses it.

On the chart below you'll see I've drawn an arrow at the point the S&P first kissed its 50-day moving average line back in March and if you squint you can see it did back off (to 1310 from 1350) in the next few trading days.

Finally, as per my post in Columnist Conversation Wednesday, the Investors Intelligence readings came in with only 23.1% bulls in the past week's reading, which pretty much puts us back at the October low area.

What I find fascinating is that these folks are not bearish as the bears are still about 5% off their peak. These folks have moved into the correction camp. Correction-minded folks are basically bulls who are looking for a short-term move lower. You can see when I add the bulls to the correction-minded folks we are still above the July lows.

In summary, there are many positive factors showing up in the market. But as we head into the next few days we will be overbought once again. So I'd look for another pullback as we head into next week.

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Know What You Own: Meisler mentioned Research In Motion. Related companies are Nokia (NOK - commentary - Cramer's Take), Motorola (MOT - commentary - Cramer's Take), Palm (PALM - commentary - Cramer's Take), Apple (AAPL - commentary - Cramer's Take), Microsoft (MSFT - commentary - Cramer's Take) and Sierra Wireless (SWIR - commentary - Cramer's Take).

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At the time of publication, Meisler had no positions in any 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.