But we are still not yet overbought. That will come later next week.

In the meantime, as I noted in Columnist Conversation yesterday morning, the American Association of Individual Investors' weekly survey results were eye-popping. The drop in bulls to 22% was simply shocking. It is the lowest reading since just prior to the March low. The surge in bears to 56% was also incredible and also a reading we haven't seen since just prior to the March lows.

I was asked an interesting question about why I thought we had only corrected 7% and yet the surge in bearishness was so pronounced. Folks, maybe the S&P had been down 7%, but the Russell had fallen by 10%, and so many small-caps had fallen by double that percentage. When stocks go down 20%, it has an effect on your sentiment ... not to mention your wallet.

With that in mind, let's check in on the relationship of the Russell 2000 and the S&P. When we last looked at this chart and I discussed the potential for an oversold rally, I indicated that we ought to see the ratio of the S&P to the Russell pull back, perhaps as far as the broken downtrend line, much the same way it did back in 2007.

It has not yet pulled all the way back, and since it is quite far away, it might not. But it is pulling back. Obviously this move is much "larger" than the move in 2007 in terms of the relationship, but the shape of the pattern still exists. As such, I will use that 2007 pattern as the template.

Now, I know folks will complain about volume yesterday, and they would have every right to. In fact, volume on the NYSE was the lowest we've had all week. It simply stinks on up days. But that has been rather consistent in this market, hasn't it?

And if you want to complain about something else, there's the new highs on Nadsaq. On Fed Day they were actually quite good, rising to 42. In fact, I applauded that increase. But yesterday we had Cisco (CSCO - commentary - Trade Now) and Qualcomm (QCOM - commentary - Trade Now) -- it was a true "tech" day -- and new highs increased by a whopping two issues. Now come on, why is it we can't seem to have any follow-through in stocks or volume?

Away from the negatives, I will remind you that we are not yet overbought on either the 10-day or the 30-day moving average lines of the advance/decline line. That will come later next week, and therefore if the employment number today takes us right back down into the range we've been in for a week, it would probably just set us up for another rally next week as we continue to work off that oversold reading. If it takes us up, maybe we'll get rid of some of that negative sentiment that has developed of late.

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