Ten Facts About Wednesday's Rally

Having been taken to task for using anecdotal sentiment in my musings on Wednesday, today I will provide just the facts.

That's right, nothing but ten facts about the market.

Fact No. 1

The Transportation Average has not made a lower low. That is bullish. Oh wait, I'm not supposed to put anything but the facts in here -- strike that qualitative comment.

Fact No. 2

The upside volume as a percentage of total volume on a 30-day moving average is now just over 43%; a reading in the low 40s is typically seen at lows.

Fact No. 3

Breadth was extremely poor yesterday. That is a fact.

There was a net differential of +200 advancers minus decliners. Compare that to June 2, when the S&P was up 2.50 and the net differential of breadth was +1100.

Fact No. 4

The oscillator went down yesterday. It will be oversold Monday.

Fact No. 5

The 30-day moving average of the A/D line went down yesterday. It will be oversold next week.

Fact No. 6

The Investor's Intelligence percentage of bulls is now 38.7%, a reading typically seen at lows.

Fact No. 7

There were six stocks that made new highs on the NYSE yesterday vs. 10 on Tuesday. We rallied yesterday; we did not rally on Tuesday.

Fact No. 8

The number of stocks making new lows expanded on Tuesday. Therefore it no longer shows positive divergences.

Fact No. 9

Volume was less yesterday, on the rally day, than it was on Tuesday, the declining day.

Fact No. 10

Maybe stocks didn't react to the poor CPI, but bonds did as the Lehman iShares 20+ Treasury Bond Fund (TLT - commentary - Cramer's Take) was down nearly a full point.

What does it all mean?

Well, the facts say there is a bottom in here somewhere. And I still believe next week is a better time for a better bottom.

Away from the indicators and the facts, I wanted to touch on the banks again.

When I put that chart of the ratio of the BKX to the SPX in my column Monday morning and said it would back off from that downtrend line, I did not expect a smash like we've seen. I expected a mild backoff. But that is not what happens in a bear market.

In a bear market, things get smashed; they don't just back off.

The Bank Index has now come all the way back to support, and it will likely take another few days to sort itself out, but this general area should see it start to hold. I will keep you posted as to when I see the ratio begin to stabilize and hold.

---

Helene Meisler writes a daily technical analysis column. 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.