Meisler: False Breakout

Helene Meisler, Jim Cramer's favorite technician, writes a daily column for RealMoney in addition to her Top Stocks newsletter. This column was originally published on RealMoney at 6:59 a.m. EDT on Monday, June 1.

I think Friday's late-afternoon surge was about as bogus as a late-afternoon decline is. But it sure seemed to make folks upset. And we can all search for a reason as to what transpired to make it that way. But in the end, wouldn't that be rationalizing an indicator? The market surged, on volume.

Keep in mind my column from Friday in which I wrote that there seems to be this growing consensus that we're in a trading range. No one realized it two weeks ago. But now that we've been in it for a month it's obvious to everyone. So everyone buys the lows and sells the highs. Therefore, we know there is a high probability we won't stay in the trading range much longer.

So wouldn't it make sense for the market to really annoy the most folks by breaking out to the upside, causing everyone to shut up about the trading range, acknowledge the breakout, and get bullish? And then come right back down?

According to the overbought/oversold oscillator we'll be overbought Tuesday, which gives us time to have the early-in-the-month rally that potentially breaks out now.