Before I took off for a few days I should have mentioned that we knew the market would go down before it reached an overbought reading. Doesn't the market always go down when I take time off?

But it does bring up an interesting point. In a strong market, we often jump the gun and rally before we reach an oversold reading. Therefore, in a weak market, we often jump the gun and begin heading back down before we reach an overbought reading.

Since Jim Cramer has touted my oscillator so much lately, I do need to address it today.

The reason I need to address it is because it is nowhere near any sort of oversold reading.

This oscillator has very little to do with price but more to do with time and momentum. It is the 10-day moving average of the net of advancing stocks minus declining stocks on a daily basis.

Before your eyes glaze over with all the calculations, let me show it to you rather simply. What I do is I look back at what number we will be dropping from 10 days ago and see if there is a pattern to the numbers we are dropping.

When we are dropping a long string of negative numbers (as we did a few weeks ago, see

This Market's Too Far in the Pink), we are oversold. Conversely, when we are dropping a long string of positive numbers, we are overbought.

Now, just to confuse things a bit more, it's not just if they are positive or negative numbers, but also whether they are large numbers.

So a few weeks ago we were dropping a string of very large negative numbers that led to the oversold rally we had around Memorial Day.

Now let's take a look at the numbers we will begin dropping tomorrow:

Friday: +1826

Monday: +1357

Tuesday: -1845

Wednesday: +1596

Thursday: +1863

Friday: +1100

There is only one negative day (Tuesday) in those six numbers, and none of those five positive numbers can be called benign. Nope, they cannot be called anything but significant plus numbers.

So even if we rally, it's hard to imagine the oscillator going up next week. You see, if we replace +1826 (this Friday's number) with +1500, the oscillator will still go down. And that is why I say the market is still overbought.

This does not mean we must decline every single day. It does, however, mean that rallies will likely not be able to gain much traction. I can't change that, as the numbers are what they are. The timing remains the way it has for a week or so now.

And that is why I do not believe we can get a good low before the week of June 19. That is why I said I expected a retest of the lows in mid-June. It has clearly arrived, earlier than I expected.

As for the current decline, well, the new lows have grown, but are still fewer than they were in May thus far. The cumulative advance/decline line is still well above its lows of a few weeks ago, despite the averages now back at those lows of a few weeks ago.

Even the Investor's Intelligence readings have come down to levels not seen in a very long time. The bulls are now back at levels not seen since August of 2004 (a low point in the market); before that, we had such low readings in February and March 2003, also a time we were in the process of making a market low.

The ingredients are there for a better low; now we're just trying to fine-tune the timing. And right now that timing is still about a week away.

Helene Meisler writes a daily technical analysis column. 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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