Finally, the Markets Rally

We finally got a rally instead of a whack in the final hour of trading Friday. And I don't think I saw anyone refer to it as a bottom. I'd say that is a bit of a change.

Another thing that's a bit of a change is that the equity put/call ratio has now had three days in a row of readings over 100%. The last time that occurred was at the August 2007 low. If I go all the way back to early 2003, I don't see another point in time where we had three days in a row. So you can see how rare this is. Readings over 100% in the equity put/call ratio tend to lead to a rally.

As I noted last week in Columnist Conversation, the American Association of Individual Investors showed its weekly survey to have a bullish percentage reading in the low 20s, which has typically marked points of rallies as well.

But the chart I am watching continues to be in currency land. The CurrencyShares Japanese Yen Trust (FXY - commentary - Cramer's Take) did not make a higher high last week when the S&P 500 did. If this is going to be a failure then it will have to break below 102 but right now I'd note there was no higher high with the S&P lower low. This is a divergence.

Speaking of divergences, the CBOE Volatility Index, or VIX, also did not make a higher high. As long-time readers know, I am a fan of the VIX when it gets jumpy, but I am also one who watches divergences and there was one there.

There was also a divergence in the oscillator as it made a higher low last week as well.

New lows were high but they were still fewer than we saw at the peak reading in mid-October. In fact they were about half what they were in October.

The McClellan Summation Index is at a higher low. Yes, it is still heading downward which is not good. But interestingly enough Nasdaq, which I use with volume instead of the advance-decline line, now needs only +600 million shares (that's up volume minus down volume) to head back up again. That is not a lot when you consider how low the market is.

What bothers me most is the fact that the 30-day moving average of the a/d line is not really oversold that much anymore. It managed to use up its window by having a market that went nowhere for a month (I know it feels as though it went down. But we were at 840 on the S&P in mid-October and we're at 800 now, so we're not talking a lot for month over month).

I suppose the bank index relative to the S&P is quite bothersome as well, but interestingly enough it still hasn't made a lower low. I supposed that shows you how much worse the banks were in July relative to the S&P vs. how they are now. In other words, the S&P is going down as well this time.

So in general, we're due for a rally. But if we see acceptance of it quickly I think it will fade just as quickly. Watch that index put/call ratio for movement under the 100% area. If that happens we'll have trouble on our hands.

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Know What You Own: Meisler mentioned Nasdaq. Some companies listed on the exchange include Apple (AAPL - commentary - Cramer's Take), Microsoft (MSFT - commentary - Cramer's Take), Qualcomm (QCOM - commentary - Cramer's Take), Google (GOOG - commentary - Cramer's Take), Gilead Sciences (GILD - commentary - Cramer's Take), and Oracle (ORCL - commentary - Cramer's Take).

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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.