Want a Rally? Whack GOOG

It was yet another low-volume decline on Friday. I mention this again because up until Thursday of last week, it was the norm for us to expand volume on down days. In the past two days we've contracted volume.

When there is a change such as this, I tend to take notice. Therefore, the same way I harped over and over about the low volume on the rise and the high volume on the declines since the August lows, I will harp about this change if it continues.

But I have also noticed that despite a rather hefty decline last week, we just can't seem to get the VIX jumpy. Perhaps it's because the favored few (Google (GOOG - commentary - Cramer's Take), Research In Motion (RIMM - commentary - Cramer's Take), Baidu (BIDU - commentary - Cramer's Take) and friends) were either up or had precious little in the way of selling these past few days.

I see a correlation -- as long as the favored few don't get beaten up too badly, folks are complacent.

Take a look at the chart of the VIX and Google together. Point A on the chart is the February crashette. Folks panicked and sold Google down, so the VIX ramped. Point B is the August low. Notice how Google gapped down in July, but it wasn't until it broke $500 that the panic set in.

Point C is early or mid-November. Notice that the market kept tanking after that low, but not beloved Google, so there was no panic after that initial whack in Google.

As I have said before, good lows/bottoms come when there is panic at the lows. Panic-selling cleans out the weak holders. We had panic in March and in August. We tried to have it in November, but it was really tepid at best. And that's one of the many reasons I have said time and again why the November low wasn't going to be like the March or August low.

So I will probably get hate mail because of this, but it seems to me that if you want a decent low in the market, someone's going to have to put the kibosh on Google first. As long as Google and the other favored few have precious little selling, it tells me that there is no panic out there. Just your basic gloom and doom in almost everything else, and a lot of hope still left in these momentum names.

Since I do hate to end on such a sour note, I will point out that the 30-day moving average of the advance/decline line is really quite oversold now. As I've explained before, this is a moving average, so we look at the numbers we are dropping over the next few weeks to determine if we're oversold or overbought.

From now until Jan. 8 -- about three weeks from now -- we will drop a very long string of negative readings. In fact, in that entire time frame there are only two positive readings we're dropping. That is definitely oversold.

The market has the anecdotal sentiment of bearishness on its bullish side. It's got the upcoming oversold reading on its bullish side. But it lacks statistical bearishness (see the VIX discussion above). If we can get some panic this week, we can still have a post-Christmas rally.

Would anyone like to sell Google to get that ball rolling?

Overbought/Oversold Oscillators

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

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