Meisler: Newfound Bearishness Has Merit

This story was originally published on RealMoney at 6:58 a.m. EDT on Wednesday, June 24. For a free trial subscription, click here.

Will the Federal Reserve's decision Wednesday on interest rates bring us fireworks or more dullsville? Because Tuesday was surely dull. The bulls will say never short a dull market. The bears will say Tuesday was a consolidation day off the decline.

I will say what I have been saying: I still think there will be a rally at the end of the quarter based on the upcoming oversold condition as well as the high put/call ratio. The end-of-day reading for the total put/call ratio on Tuesday was 100%. That is the second reading we've seen in triple digits for this indicator in a week. Folks haven't been this bearish since before the lows in March.

This isn't to say that the newfound bearishness isn't without merit. Many stocks have fallen 25% to 30%, and in some cases they have fallen a lot faster than they've gone up.

The intermediate-term indicators have rolled over. The McClellan Summation Index has rolled over for both Nasdaq and the New York Stock Exchange. The 30-day moving average of the advance/decline line isn't yet maximum oversold (as discussed Tuesday, it ought to have a respite to the upside between now and the end of the quarter). The 10-day, 30-day and 60-day moving averages of the put/call ratios are all well off their lows and rising.