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I remember well the days prior to the 1991 Gulf War. I was working at Goldman Sachs then, and on Jan. 15 I was asked to give a presentation to the research staff. I can still recall what I said to them. Two days before the war started, I told this group I wasn't sure if the

Dow Jones Industrial Average

would go down 5 points or 500 points when the war started, but the market was bullish, and it was a buying opportunity.

I didn't reach this conclusion because I was so smart. I made that statement because of how the indicators lined up at the time. But I don't see many similarities between then and now when it comes to the market.

The attack on Iraq has begun. If the market falls, I think it will be a temporary pullback before we see strength return. And should we rally in response to the war, then I believe the move higher will last a few days before exhausting itself.

I have no particular insight into the war; I'm simply following what my indicators say. If we were entering this war with an overbought market, I'd probably say something different. But we went in before the market reached a maximum overbought reading. Typically, the market must reach a maximum overbought level, back off and rally again, but only reach a lower overbought reading, before we start talking bearishly. For now, time is still on the bulls' side.

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




on the bulls' side -- or is at least heading in that direction -- are the latest

Investors Intelligence

sentiment numbers. According to the latest survey (courtesy of Chartcraft.com), bulls soared this week from 39.8% to 46.6%.

Another sentiment indicator to watch is the put/call ratio on a 21-day moving average. Hang onto your hats, because it's now only three to six days away from making a low, signaling that the market is moving into a later phase of the rally.

I think this indicator previously called the bottom. The put/call ratio made its low around the Feb. 13, essentially marking


latest low. On March 12, Nasdaq made a marginal new low, but many individual stocks were already well off their worst levels.

In short, even if the market heads down from here, I don't think we've seen the last of this rally, even if it is getting too late to chase the move to the upside.

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Helene Meisler, based in Shanghai, writes a technical analysis column on the U.S. equity markets and updates her charts daily. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback and invites you to send it to

Helene Meisler.