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Almost as soon as the market rallied yesterday, my inbox was filled with folks in panic wondering if the correction was over and done with! A correction doesn't mean we must go down every day. A correction doesn't mean we must fall apart, either. It means we should work off the overbought-ness in the market. Sometimes that is sideways, and sometimes that is down.
We are not yet oversold. Breadth is still lagging. And the total put/call ratio came down to 82%. The last time we had a reading in the 80s on the put/call ratio was April 18. The following two days saw the S&P lose 14 points. Not a big deal, but a correction. The previous time was March 24. In the following four trading days we lost 33 points on the S&P. Prior to that was Feb. 1, and we know that was the high point off the January rally.
But look at the chart of the S&P from that February. The first of the month might have been the high, but when you study the chart, you see that we had a two- or three-day decline and then we milled around and went back up.
In order for us to get an intermediate-term decline, the Investors Intelligence readings (which will be out today) need to move at least into the 50%+ area. They have not yet done so.
Therefore, until we get at least some of those indicators (and there are others, too!) to turn, we're only talking about a correction. And that can be sideways or down. So I am still in the correction camp.
Overbought/Oversold OscillatorsFor more explanation of these indicators, check out The Chartist's primer.  
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. Brokerage Partners
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