Floor volume on the NYSE has been shrinking on a daily basis. Off-floor volume hasn't been spectacular, but it's been better than floor volume.

Volume on Nasdaq was a fraction better than it was on Friday. The marked contrast is that when we have a big down day, such as we had last Wednesday, volume does expand. For Nasdaq, it was 2.2 billion on Wednesday and only 1.7 billion yesterday.

For the NYSE it was 1.2 billion on Wednesday and under 1 billion yesterday. If we use off-floor volume for the NYSE, we get 4 billion on Wednesday and about 3.3 billion yesterday.

So the bottom line is that there is a volume problem out there. If I had to come up with a reason the volume was so lacking in yesterday's rally, I might say that last Wednesday caught the bulls by surprise, so they started selling some of those longs they had acquired over the previous three to six weeks. This is where the increased volume comes in.

But they didn't necessarily turn bearish until Friday and AIG's (AIG - commentary - Cramer's Take) announcement Thursday after the bell. So the shorts probably started to build up Thursday and Friday. And what we probably got yesterday was short-covering.

But there was another problem, aside from the volume -- the number of stocks making new highs. Just over a week ago, Nasdaq had 58 new highs on its higher high, and yesterday it had 39 new highs. This is not a great showing.

Over on the NYSE, the peak reading for new highs was on April 18 with 156. Since then, we've steadily dropped off. Yesterday's reading was only 65 new highs.

Now, because I don't want to be accused of leaning too bearish here, let me say that breadth actually made a marginal higher high yesterday. We do have to squint to see it, but if we use the published data on the NYSE, the cumulative advance/decline made a higher high yesterday, while the S&P is still about 15 points below its high of a week ago.

If we use the common stocks only, that is not the case. However, it only missed by around 30 issues, so I wouldn't scoff at that.

Cumulative volume isn't very impressive, as that is still lagging.

In sum, we were oversold enough to have a rally. I don't think this rally can be particularly long-lasting right now, as without volume and an expansion in new highs we'll probably keep in the correction mode.

So far we got to 1396 on April 28 and here we are at 1403 on the S&P, so the correction has been in place for two weeks now. Right now it's digestion. If the intermediate-term indicators roll over (they keep warning but don't do it), it will be indigestion.

Overbought/Oversold Oscillators

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