March 21, 2000

The

NYSE

and the

Nasdaq

act vastly differently, right? Or do they?

The reality is that stocks are stocks and humans are, well, human. And human nature doesn't really change all that much. So if humans are trading stocks, then chances are that stocks, whether they go up or down, will tend to trade similarly. Of course, they may not be trading the same way at the same time, but not all stocks are in the same place at the same time, either. This is why the same piece of news can be bullish to one and bearish to another.

From the middle of January until the middle of last week, the

S&P 500

and the

Dow

went down more often than not. It was as if the bad news kept getting worse, but there comes a time when even bad news gets priced into a stock. This is what I believe happened to many Old Economy stocks. The bad news kept on coming, yet the stocks stopped going down. When that happens, one minor piece of good news can bring about a huge rally.

We've seen this sort of action before: How many times has the market sold off toward the end of a quarter and early into the next quarter in anticipation of preannouncements of earnings disappointments? Probably more than you can count on both your hands and your feet. But by the time the actual earnings are announced, all the bad news is in the stocks. We then find that there has been so little buying in advance of those earnings that the upside surprises bring about a rally.

So now that the S&P has rallied to its old highs, we need to figure out whether or not all the good news is now priced in or whether there's still room to go further. And since we're about to enter a news flood beginning tomorrow with the

Federal Open Market Committee

meeting and going straight through the end of April with first-quarter earnings, the market's reaction to this news is important. I believe there is still further to go on the upside, but let's review what we know.

The NYSE is oversold, and at this point, it's hard to tell when it might get overbought. That's good news. (For those who require a further explanation of this indicator, please click on my

primer.) But the number of stocks making new lows on the NYSE has contracted in a big way. In fact, fewer stocks are making new lows now than when the S&P was at this level a few months ago. And that's good news.

Breadth has improved as well on the NYSE.

The McClellan Summation Index

, shown

TheStreet Recommends

here recently has not only held at a higher low, but it has also curled up, which is good news.

In addition, the

New York Unweighted Average

, or NYUA, shown

here one week ago, has eked out a new high. Last week, I showed how this indicator had not made a new low, which was bullish, but this week you may have to squint to see the new high.

You can, however, see the high the NYUA made last summer as it was made in conjunction with a new high in the S&P. But more recent highs in the S&P in late December and early January were unconfirmed; the NYUA was still far away from making a new high.

Nonetheless, the action in stocks continues its improvement. Even though we cannot expect the NYUA to surpass last summer's highs at this point, the NYUA has eked past its late December/early January high. This is more than we can say for the S&P, which stopped just shy of its high.

Oh sure, things could be better. It would be nice, for instance, to see an expansion in stocks making new highs or to find lots of stocks with big bases, instead of hundreds of stocks with tons of overhead resistance. But we've just completed the downside, and it's not likely we'll see very bullish upside numbers for quite some time. Remember this is a process and not an event.

Just go back to that

Best Buy

(BBY) - Get Report

chart -- this stock did not even cross its downtrend line until

three months after

it made its low. And many of the NYSE charts have only recently traded at new lows. There is plenty of resistance overhead and therefore plenty of backing-and-filling that will be required; it's all part of the process. And as part of the process, any news that takes the S&P down will actually help, and is therefore buyable.

The

Nasdaq

, having just surpassed the 5000 mark, is on the other side of the spectrum from the NYSE: All the good news was already in these stocks. This market was oversold on Monday and is now grossly oversold. It is now more oversold than it has been at any time since last summer's plunge.

In the same way that the NYSE had to stop declining on bad news, the Nasdaq will have to show us it can do the same. I'm watching the number of new lows, and there was very little expansion in this number yesterday. Another big plunge, perhaps something similar to last Thursday morning's plunge, with fewer stocks making new lows would be helpful. That's one of the ways we'll know the Nasdaq's correction is over -- when it stops reacting to negative news.

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 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

KPMHSM@aol.com.