Inching Toward the Maximum Oversold Level - TheStreet

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You know, I don't think I can recall a time in the past two years when the market has rallied and people have balked at it so much. Maybe it's because their favorite stocks (technology) aren't leading the way. Maybe it's because we're just lumbering along, not surging the way we have before.

Some are saying that Wednesday marked a reversal. To be fair, I always thought a reversal was supposed to begin from a lower low (or a higher high), not from somewhere in the middle of the range. Wednesday's intraday lows didn't break the previous ones we've seen, so this remains part of what I began discussing last week: Sentiment got too bearish (as determined by the 21-day moving average of the put/call ratio), and the market has been moderately oversold.

How long will this

fits and starts rally last? First, we need the indicators that have only just reversed course within the past two days to run their course and swing back to the other side of the ledger. That won't happen overnight.

The oscillator is still not at a maximum oversold level, so we might just have another try on the downside. But as you can see from Wednesday's action, the downside is getting late. We'll be maximum oversold by Friday, so I'd expect it to be even more difficult to take the market lower next week and keep it there.

We need to get the oscillator back into an overbought condition to have a market slide of some consequence. Because we haven't even reached the maximum oversold level yet, an overbought reading is still some time away.

In the meantime, I must mention the chart of

McDonald's

(MCD) - Get Report

. This stock has been down and out for so long, I can't even remember the last time it saw some good news. That's what makes it so interesting in here: It's been given so much bad news, yet it still refuses to break. It now seems to be immune to bad news. Its chart is really beginning to look like a decent base.

Better Times for Mickey D's?
A little good news could do a lot for this stock

I won't argue if you want to point out all of that resistance overhead, but a stock that continually refuses to go down on bad news will typically rally when given just one little piece of good news. So imagine what McDonald's might do if there were some good news for once?

Helene Meisler, based in Shanghai, writes a technical analysis column on the U.S. equity markets and updates her charts daily on TheStreet.com. 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.