Sell Strength

As so many folks have told us lately, September is supposed to be a cruel month for the market.

Of course, the four-year presidential cycle tells us we're supposed to get a low in the fall through year-end.

All I know is that so far, we've gone nowhere on the S&P and down on the Nasdaq. The breadth figures have been pretty good because the financials have stayed green these past few days.

Would it shock you to know that the NYSE's breadth has been positive five out of the last six days? In that time, the S&P is up four points.

In fact, if you wanted to be bullish, you would point out that the cumulative advance/decline line has now outperformed the S&P.

Of course, this brings me to the overbought/oversold oscillator, which is the 10-day moving average of the net of the a/d line. So when we look back at the numbers we are dropping off that moving average, we look for points where we are dropping a long string of positive numbers (that would make us overbought) or when we are dropping a long string of negative numbers (that would make us oversold). So it might interest you that in the past 10 trading days, only three saw negative market breadth. That pretty much makes us close to overbought.

When I determine which day I think the market will be overbought, I look for the point at which we will be dropping a long string of relatively large positive numbers. Today we're dropping a very modest +197, and tomorrow we drop a negative number (-406). But beginning Monday, we drop a string of positive readings. So I'd say we'll be maximum overbought somewhere between here and early next week.

Now let me tell you about an odd occurrence from yesterday's trading action. The CBOE's put/call ratios -- the three I watch -- were all relatively low. For a day where there was so much damage done on the downside in so many stocks, I find that very curious. Low readings are not bullish.

The other day I showed the chart of the 30-day moving average of the CBOE's equity put/call ratio and how it was still heading downward, which is bullish. I also mentioned (but did not show) the chart of the ISE's 21-day moving average and how it was still rising (bullish). Well, it's still rising, but it's beginning to show signs of rolling over.

So far, we need a microscope to see the potential curling over, but you'll note the points on the chart: A is the July high in 2007; B is the October high; C is the May high of this year.

To sum it up, we have the Nasdaq McClellan Summation Index rolled over. We have the Nasdaq volume relative to the NYSE's volume peaked. We have Nasdaq relative to the S&P peaked. We saw an increase in stocks at new lows yesterday. We have the 30-day moving average of the a/d line overbought. We have the Volume Indicator at that low 50% range, too. And now we're going to be heading toward an overbought reading. I'm still leaning toward being a seller into strength.

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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.