The 'Sell the Bailout Rally' Trade Will Change

Everyone wants to know if Thursday was a bad-news low given General Electric's (GE - commentary - Cramer's Take) weaker earnings forecast and whether its ability to rally makes for a bottom. Well, it surely would have been a lot better if we'd rallied just off that news and not on the news that there might be a government bailout plan of financial firms in place.

So let's chalk Thursday's action up to a mixture. I say a mixture because yes, we had a rally off of GE's bad news, but the bailout plan news got in the way and muddied the waters.

All the things we liked about the market earlier in the week on the down days were things that were not good about Thursday's rally. For example, breadth had been holding up fairly well on the down days, but in Thursday's rally it was as mediocre up as it had been down earlier in the week.

New lows, which had been shrinking -- and continue to shrink -- are counteracted by the new-high list's inability to expand on an up day. Between the New York Stock Exchange and Nasdaq, we had 14 stocks at new highs. Folks, we were up nearly 40 points on the S&P 500 intraday and we had fewer than 15 stocks at new highs? Not good.

The put/call ratio was a real bother to me. There are those who say I should ignore it since once the short ban was put into place this indicator has become meaningless. That might be the case, but last Friday's ratio for equities was only 51% and we managed to fall 50 points on the S&P on Monday. Thursday's reading was 62%, which is really way too low.

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