May 16, 2000

I promised myself I wouldn't fall into the same old trap of letting an impending meeting of the

Federal Open Market Committee make me think investors would take a "wait and see" attitude. And guess what? I did it again! Next time I'm gonna put a big sign on my PC so I don't forget.

On April 28, I showed the market's reaction last year at this time to a higher-than-expected

Consumer Price Index and an impending FOMC meeting. The market had been down going into that higher-than-expected CPI in late May 1999 and that number just accelerated the decline. Shortly after that economic report, the market began rallying, despite all the nervous chatter about higher rates at the June meeting. Because we'd rallied into the meeting, I suspected back then that the market would not react positively to the rate increase. I was wrong, as the market continued rallying for almost three more weeks. Oh sure, it came down after that, and pretty hard at that, but basically the FOMC decision to raise rates had very little immediate impact on the market.

Yes, we will all tune in to the same Bat Channel at the same Bat Time (2:15 p.m. EDT on Tuesday) to see what the FOMC's decision is, but it's obvious that if you wanted to sell because you thought the Fed would raise interest rates 50 basis points, you've already done so.

I can make a case that the




are moderately oversold right now.

Neither is a great oversold, and neither one is the kind of oversold condition that says full steam ahead, but at this point the rally could continue, in fits and starts, through the middle of next week. This would be consistent with the reaction to previous rate increases by the Fed, as we have rallied somewhat beyond the announcement, only to realize that another meeting is right around the corner.

The NYSE continues to show much-improved statistics, as the number of stocks making new highs has expanded over the past couple of days. Yesterday's showing came in at 107, almost the same showing this exchange put in at the end of March when the


made its high. In addition to the new highs, cumulative volume on the NYSE has now surpassed the March highs and is now just shy of its November high.

These are all good signs for the Old Economy stocks that reside on the NYSE. Much of this improvement comes from the interest-rate sensitive names, the same ones that spoiled the statistics on the way down. As a reminder, here's a chart of the

New York Financial Index

, in which I

showed that a break of 550 would be bullish. We have not seen that number crossed to the upside; this index has essentially gone sideways in recent weeks, despite the 50-basis point upside move we've encountered in 10-year rates during that same period. If this index were to break out, statistics on the NYSE would improve even more as these interest-rate sensitive stocks are still a large percentage of the total stocks on the NYSE.

The Nasdaq's underlying statistics are not as impressive. Many of these stocks continue to show that rallies bring sellers out. With the average as well as stocks so far down, the number of stocks making new highs is small and not a factor like it is for the NYSE. I'm watching the cumulative volume for the Nasdaq. It's not outperforming by any stretch of the imagination. If it were, we would be able to talk about underlying improvement, but so far it's been lucky just to keep pace with the Nasdaq Composite. This is primarily the result of the low-volume rallies we've seen lately. The relationship of up volume to down volume may be okay, but it's not doing anything to help the cumulative total. You can easily see the difference between the improvement on the NYSE vs. the milling around that's taken place on Nasdaq.

The biggest challenge for Nasdaq stocks right now is the magnitude of the declines and the resistance overhead. Even



, which has been holding its own at

support for several weeks, has significant

resistance not much further ahead at 150. This is the level that this stock held for two months, which suggests there are investors just waiting to sell at in that price area. Sure, these stocks can rally, but there are no

breakouts imminent, only sellers waiting just above.

When the May FOMC meeting is out of the way and the rally has run its course, investors will again begin to focus on the June FOMC meeting, which in turn should put the lid back on this market.

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 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 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 at