When

E.F. Hutton

talks...

Many of you probably don't remember that advertisement from the early 1980s. In fact, I'd guess there are a lot of investors out there saying, "Who the heck is E.F. Hutton?"

E.F. Hutton was one of the large brokerage firms back then; it went belly up after the 1987 crash. But that's not why I bring up that old advertisement. I bring it up because it seems to me

Goldman Sachs

ought to use that old ad with regard to

Abby Joseph Cohen

. When Abby speaks, people listen.

On Wednesday morning, Abby was speaking. She told us to buy stocks. She announced targets for the

Dow

and the

S&P 500

of 10,300 and 1325, respectively. I quickly did the math in my head. It came out to a 6% move for the Dow and a 5% move for the S&P. Now I wouldn't want to challenge Abby since she's been so right on this market, but it seems to me that if the biggest bull on Wall Street tells you there's 5% left on the upside, you start selling into that news, not buying.

But not today's investors. They use any excuse to buy. An entire 5% left? Let's buy. War is not hell to today's investors; it's a reason to buy. Durable goods are down 5% -- must be good for stocks. And obviously there were not many on Thursday who cared that the yield on the 30-year Treasury had climbed to its highest level in almost three weeks.

This chart is developing into a good base. While I still expect a lot more backing and filling over time, the trend has clearly proven itself to be up.

But back to Thursday's action. Actually, we should begin with Wednesday's action first. As noted in yesterday's

Daily Chartist column, the new lows contracted to 110 on Wednesday from 137 on Tuesday. This happened while the Dow and S&P were trading at new intraday lows. That was the first positive divergence we've seen in quite some time; stocks were exhausted on the downside and ripe for a rally.

Then came Thursday. That was a good number on the advance/decline line. In the entire rally from 9000 to 10,000, we only saw three days with an A/D line that good, so I cannot scoff at that number. In fact, the number was so strong that it actually reversed the overbought/oversold oscillator a day or two earlier than I thought. As I watched the tape, I found myself impressed with the breadth of the market.

So stocks should just explode higher from this point, right? Not so fast. This market has a very big test ahead of it as it approaches Dow 10,000 again.

Stocks may not have wanted to go down any further, but now we need to see if they really want to go up. As stocks rally, it will be important to see if investors are willing to pay up for them. At the same time, we need to ascertain if people are using this rally as an opportunity to sell into strength. This is why we must watch the indicators to see if they can better their previous rally highs.

For example, the overbought/oversold oscillator must now get through that peak reading we had last week. And the cumulative advance/decline line must also surpass its previous peak. That indicator will need a net of almost positive 2,000 just to get to last week's reading. To put it in perspective, yesterday's A/D was positive 831, which means we need the A/D line to be that strong for 2 1/2 more days. As I previously noted, in the entire rally from 9000 to 10,000, we only had three days with readings that positive. In fact, the last time the A/D was positive for three days in a row was in late December/early January. While I will not prejudge the magnitude of this rally, I do believe this would be quite a task for the market at this point.

In addition, it's not just the A/D that needs to get in gear. The

Dow Jones Transportation Average

will need to get through 3433 -- doable, but that's about 150 points away now. The

Dow Jones Utilities Average

need to tack on another 3 points through 307. (And did you notice they chose not to participate in Thursday's rally?) The

NYSE

finance index will also require a big push: It needs 20 points, or about 4%, to surpass its March high. And don't forget the stocks at new highs. There were 27 yesterday. The peak reading in March was 82.

Are there any good charts to buy? Sure.

Procter and Gamble

(PG) - Get Report

had a great big breakout; its target is near 125. Don't forget another soap stock,

Colgate

(CL) - Get Report

, is also a good chart. For Dow stocks,

AlliedSignal

(ALD)

has a two-year base it's just now breaking out of. And I thought

Coke

(KO) - Get Report

acted rather like it was sold out into

Merrill's

downgrade this week.

Keep your eyes on those oil-service stocks; they don't seem to want to back off from resistance very much.

Baker Hughes

(BHI)

through 24 is a big breakout, and

Schlumberger

(SLB) - Get Report

is acting much better in here.

On the negative side,

AT&T

(T) - Get Report

may have bounced but backed off as soon as it got to resistance at 83 to 84; it acts tired.

3M

(MMM) - Get Report

is a lousy chart, even if it does have support down here.

Bristol-Myers

(BMY) - Get Report

should bounce from this point but will likely fail again, where I'd sell it. There's so much press on

Dell

(DELL) - Get Report

, I'd say it likely trades sideways and just frustrates bulls and bears alike at this point.

A comment on

Amazon.com

(AMZN) - Get Report

and

Yahoo!

(YHOO)

is necessary here. On

Tuesday morning, I said they appeared to be rolling over. They did. But then on Wednesday morning, in quite a few of the faxes I receive from sell-side technicians, I saw they had all picked up on the now-down charts. Too many shorts equal one big rally. I was both surprised and impressed at the strength in their rallies (in fact, they were the only stocks I found like that) and would be even more impressed if these two stocks can take out their March highs.

With the market showing signs of moderate oversoldness, we can see this rally continue, but any sign of these indicators failing to surpass their March highs will be proof to us that investors are selling into this rally. As investors sell into strength, we will see stocks fail at lower highs; lower highs typically lead to lower lows. And after Thursday rally we're even less than 5% from Abby's upside targets.

Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she was long AT&T, 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 at

KPMHSM@aol.com.