Fireworks on Wall Street

But despite the latest rally, some indicators retain their sloppy readings.
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The fireworks came early on Wall Street this week. Why wait for the Fourth of July when you can begin the party on June 28? It's sorta the same way the retailers begin celebrating Christmas earlier and earlier each year. Everybody's trying to stay ahead of the curve.

As I discussed

Tuesday, we saw one of my favorite sentiment indicators reach a level which typically marks a low in the market. The Specialist Short Ratio had come down to 43%, a level which, for the past year, has coincided with the beginning of rallies. So why didn't I pound the table and scream about buying? Mostly because the other indicators I monitor were in the middle of nowhere and looking quite sloppy.

Has this rally changed that? For some indicators it has, while others still retain their sloppy readings.

The market rallied from a level which was smack in the middle of the overbought/oversold oscillator. This is not usually an area from which to launch a sizeable rally, but this week it did. You may recall this oscillator is based upon the advance/decline line. It is a simple 10-day moving average. This means the net A/D we post today should exceed the net posted 10 days ago if we are to maintain the upside momentum. Since the market had rallied strongly two weeks ago, we were dropping some rather large numbers this week. This was one of the reasons I didn't expect momentum to be on the buy side this week. The market rallied anyway, and with some good A/D readings.

However, those positive A/D readings this week did not surpass the bigger numbers of a few weeks ago. You can see on the chart that the oscillator did not continue higher this week; instead it turned down. But for now, that's OK. I will not view it as a negative. The oscillator is weathering this potential storm and should head higher again. While the market is not oversold, I do think it is not yet overbought.

The reading in the number of stocks at new highs on Wednesday was quite good, although it will need to surpass the 173 we saw in April very soon to stay in a positive mode. Thursday's reading of 108 was not exactly a step in the right direction, but I'm willing to be patient for now.

While the indicators are heading in a positive direction, I am concerned about nonconfirmations. I do not like it when the

S&P 500

makes a new high but the

DJIA

,

DJTA

and

DJUA

do not. In addition to these three averages not confirming the S&P high, the

New York Finance Index

has not yet surpassed its May 13 high. The nonconfirmation in the cumulative A/D line is not something that makes me comfortable either. It is currently over 2,000 issues away from its May high.

And what about the bonds? The yield on the 30-year Treasury bond is now hovering around 6%, which is a quarter-point higher than the last time stocks were at these levels. Which means earnings better put in a good showing.

Speaking of earnings, what worries me most is the one-sided view of the up coming earnings season. If I hear one more time how the lack of pre-announcements is a positive for the market I think I'll scream! Maybe those folks who are saying such things haven't seen the disappointments announced by

American Home Products

(AHP)

,

AMD

(AMD) - Get Report

,

Micron

(MU) - Get Report

,

Philip Morris

(MO) - Get Report

,

Goodyear

(GT) - Get Report

,

Starbucks

(SBUX) - Get Report

,

Compaq

(CPQ)

or even

Mirage

(MIR)

just last night. And those are just the ones I remember off the top of my head. Heck, companies just closed their books on the quarter two days ago. Give 'em a chance to see how they fared.

Besides, as stocks run up into their earnings reports, the good news tends to be priced in already. Did you see

FDX

(FDX) - Get Report

and

Nike

(NKE) - Get Report

this week?

As for individual stock charts,

General Electric

(GE) - Get Report

can be bought into this little dip.

3M

(COMS)

is hanging tough for now.

Chevron

(CHV)

needs a dip but is still OK.

Elsewhere,

Colgate

(CL) - Get Report

has drifted down but continues to look buyable here.

Gannett

(GCI) - Get Report

still needs 76 as a breakout. I have a hunch

Dell's

(DELL) - Get Report

next move will be back to the low 40s.

On the negative side, Goodyear is struggling to get back on track.

Merck's

(MRK) - Get Report

run should stop up at 76 to 78.

Procter & Gamble

(PG) - Get Report

needs to hold 82 or it will be just awful.

Outside the DJIA, American Home is a sale around 60.

Merrill Lynch

(MER)

should stop around 82.

PepsiCo

(PEP) - Get Report

headed right back down after its recommendation this week.

Sara Lee

(SLE)

is just a down stock, albeit one that's at support. I'd sell rallies.

Toys R Us

(TOY)

looks like it's failing one more time.

I didn't mean for this column to sound as bearish as it does. All I intended to do was point out that several of the sloppy indicators are still acting sloppy. Many stocks spent the morning backing and filling yesterday, especially when the

NAPM

was announced, before pushing higher. We can likely expect more of that type of backing-and-filling action over the next several days.

Happy Fourth of July!

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 Nike, 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.