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As I posted in

Columnist Conversation

Wednesday, the index put/call ratio was the highest we've seen in quite some time. In fact, the last three times we saw the ratio in this neighborhood (155%) were Dec. 29, 2008, which led to a decent year-end rally; Dec. 3, 2008, which was followed by an awful day in the market but was then followed by two very good days (first we were down 25 points on the

S&P 500

and then up 63 points in the next two days; and the November 2008 lows.

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The total put/call ratio was 118%, which is the highest reading we've seen since January's expiration. Keep in mind that January's expiration was followed by the day of the presidential inauguration, an ugly day in the market. In other words, the rally started from a lower point, not right then and there.

This brings me to the moving average of the put/call ratio. Recently, I've shown the chart of the 10-day moving average indicating that it was at the lower end of the chart page, a bearish sign. However, with the past two days' readings it has lifted off the page. I attempted to figure out when it might peak and head back down again which would at least be supportive of the market.

It seems to me it could peak in about four trading days. That would be Tuesday or Wednesday.

The oscillator is not yet maximum oversold. That could be oversold Tuesday or Wednesday as well. Then there is the 30-day moving average of the advance/decline line. It will be moderately oversold again sometime between Friday and Tuesday. Let me alert you that this would be a moderately oversold condition, one that would get overbought again relatively quickly soon after the new month begins.

The flip side of this is that breadth was awful Wednesday, and when breadth is awful it tends to lean on the McClellan Summation index, making it head lower. Thus this indicator is heading down, not up. When I calculate "what-ifs" to see what it will take to turn this indicator back up we need a net differential of +3,800 advancers minus decliners. Typically, we find the market is considered extremely oversold when this indicator needs something "near" +5,000 to turn it back up. This would indicate to me that some more downside is needed first to get this more oversold.

I don't know how this plays out in the next few days. By that I mean I don't know if we have another few down days leading us to next week's oversold reading, or if we rally for a day or so and then head back down post-expiration -- as is often the case -- before getting oversold enough to rally.

I think we are heading toward yet another end of the month rally next week. It's just hard for me to decide if we rally and come down again or if we just go down some more and then rally post-expiration.

For more explanation of these indicators, check out The Chartist's



Know What You Own: Some stocks mentioned recently by Helene in her "Top Stocks"newsletter include Valero Energy (VLO) - Get Report, ProShares UltraShort Real Estate (SRS) - Get Report, Apache (APA) - Get Report, Research In Motion( RIMM), Peabody Energy (BTU) - Get Report, Bucyrus( BUCY) and Ctrip.com (CTRP) - Get Report.

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,

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. 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;

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