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Dow Jones S&P 500 NASDAQ 10-Year Note
10,285.97 1,091.93 2,172.99 33.92
Oil *
75.40
DOWN
104.14
DOWN
11.32
DOWN
16.62
DOWN
0.56
10 Yr
3.39%
SPDR Gold
110.95
-1.00%
-1.03%
-0.76%
-1.62%
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Opinion : Helene Meisler -TSC


Don't Judge the Rally Yet

By Helene Meisler
Special to TheStreet.com
03/05/2002 08:46 AM EST

Editor's Note: Helene Meisler's column runs exclusively on RealMoney.com; this is a special free look at her column. For a free trial subscription to RealMoney.com, click here. This article was published March 4 on RealMoney.

Well, just as I decided to open my big mouth on the negative look of the Philadelphia Stock Exchange Semiconductor index, or SOX, chart, Novellus (NVLS:Nasdaq - news - commentary - research - analysis) upped its revenue view by a few pennies, and the stocks took off! So I must address the SOX chart again today.

But first, I must address another aspect of the market. As I've been saying, the market got positive divergences nearly two weeks ago and didn't want to go down. I was wrong in that I believed it didn't want to go up, either. It just took a while to rise, and I was clearly losing patience.

As for Friday's rally, there are plenty of reasons we can say it wasn't very good. You probably don't need me to point out that volume was mediocre at best; heck, it was lower on the Nasdaq Friday than it was Thursday. That isn't a good sign. Nor is it a good sign that the rally can really only be seen in the semi stocks. Elsewhere, you had to squint to see any such rally, let alone a 4% move.

However, as I've said a zillion times before, the market isn't about one day's action, but rather the action over several days -- or more important, the underlying trend that is developing. And the underlying trend that had been developing since Feb. 20 is that the downside had lost momentum. This loss of downside momentum has manifested itself by turning some of the intermediate-term indicators.

Last week, I promised to keep you up on the McClellan Summation Index charts, and today I'll show you that the New York Stock Exchange chart, where we had to use a magnifying glass last week to see the turn, has now clearly moved higher once again.

Over on the Nasdaq, I can't report the same news. The Nasdaq's chart has stopped going down after Friday's action. Oh, a few more days on the upside, and we'll be able to see the turn. But for now, it has not yet turned.

I've spent much of the past few weeks discussing the number of stocks making new lows. In fact, that was one of the main reasons why we could see some positive divergences developing. But with the rally, this focus should now switch to the number of stocks making new highs. Friday's action showed an increase in the number of stocks making new 52-week highs, although I am quite disappointed in the showing on the NYSE.

For weeks now, the NYSE has been showing a steady increase in the stocks making new highs, while the S&P 500 meandered back and forth around 1100. But on the day the S&P finally surged past its recent rallies, the number of stocks making new highs eked out a mere increase of six stocks. That's right -- Friday's huge rally showed only six more stocks making new highs than during Thursday's rally. Now, the number is still increasing, but if that's all it can do on a big up day, we must now monitor this closely for signs that the rally has run out of steam.

As for the SOX, well, it really was the only place we saw a rally of any magnitude. It has now rallied right to the short-term downtrend line that has been in place for two months. If it breaks through this downtrend line, then a run to the longer-term downtrend line at 620 looks doable. For now, it remains in the trading range we've seen since November.

While I can find a lot of reasons to dislike Friday's rally, I can also say that the market won't reach a maximum overbought reading until later this week. In addition to that, an intermediate-term indicator on the NYSE has turned higher. Although the Nasdaq's hasn't done so yet, it may shortly. Let's not prejudge this rally just yet.

Overbought/Oversold Oscillators

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


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Dow Jones S&P 500 NASDAQ 10-Year Note
10,285.97 1,091.93 2,172.99 33.92
Oil *
75.40
DOWN
104.14
DOWN
11.32
DOWN
16.62
DOWN
0.56
10 Yr
3.39%
SPDR Gold
110.95
-1.00%
-1.03%
-0.76%
-1.62%
Data delayed 20 minutes

Helene Meisler, based in Shanghai, writes a technical analysis column on the U.S. equity markets and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback and invites you to send it to Helene Meisler.
Read our conflicts and disclosure policy.
Order reprints of RealMoney.com articles. Top


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Sorry, the page you requested could not be found

Sorry that you couldn't find the page you wanted.

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Content Search:

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TheStreet Directory

Dow Jones S&P 500 NASDAQ 10-Year Note
10,285.97 1,091.93 2,172.99 33.92
Oil *
75.40
DOWN
104.14
DOWN
11.32
DOWN
16.62
DOWN
0.56
10 Yr
3.39%
SPDR Gold
110.95
-1.00%
-1.03%
-0.76%
-1.62%
Data delayed 20 minutes