Indicators Signify Upward Bias

So we broke the old lows and we had fewer stocks making new lows. Fewer than we had in late October, and fewer than we had in mid-October. Higher lows are what make bases.

Volume was excellent Thursday as it was the highest we've seen in weeks. The equity put/call ratio stayed high with a reading in the 90s, which I also liked, but the index put/call ratio fell to 106% by the end of the day. I did not like that at all. If we get a reading under 100% it won't be bullish.

I would also note that breadth was awful on a relative basis. I cannot find a way to spin it bullishly. We had a net differential of +1500 advancers minus decliners on the New York Stock Exchange where the day before we had a net differential of -2600. If we do some quick math that means we're still down 1100 issues and the S&P 500 is up 12 points.

But the flip side is that the McClellan Summation index is still rising for now as that cushion it had from the late October rally gave it a lot of leeway to stay positive in that decline.

Keep in mind too that the moving averages of the put/call ratio are also supportive of a rally for now.

Then there are the currencies. A few weeks ago I showed the chart of the CurrencyShares Japanese Yen Trust (FXY - commentary - Cramer's Take), the exchange-traded fund for the yen vs. the dollar, and explained that when it declines it is bullish for the market. It continues to decline.

Currency Shares Japanese Yen Trust

Click here for larger image.

Notice how at the March low we had a similar pattern where it gapped up and gapped down leaving an island reversal behind. Then we had another little rally and then came down. I don't know if we can do the same thing we did in March, but I'd expect that we'll at least see it work its way down to the red line.

---

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