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With the success the U.S. and coalition forces are having in Iraq, many observers now expect the war to be over sooner rather than later. Maybe then the focus will shift from the war to the upcoming earnings season, but it should also allow for some other news to find air time. And speaking of other news, the economic news has been pretty grim lately.

The bears are getting the news they expected on the economic front, but not the market reaction. The stock averages aren't zooming ahead, but they also aren't dropping sharply on the bad economic news. In either case, it's not the level of the market that counts but the underlying statistics and how they're faring that matters.

With that in mind, let's take a look at the chart of

Nasdaq

and consider the rally from last fall. Back then, technicians were focused on a flat trendline around 1425. The Nasdaq had a potent breakout when it crossed that trendline, ramping higher for about seven trading days and tacking on roughly 100 points.

Returning to the market today, so far we haven't seen a higher high, and the market hasn't broken the downtrend lines that are attracting attention. That needs to change. The pattern of choppiness from the past couple of weeks must be altered. Since the averages haven't been declining from all this bad economic data, the market seems to want to break out across those downtrend lines and force the bears to throw in the towel.

That's when the market is probably going to run into trouble. For starters, after spending two months leaning toward the bullish case, the Specialist Short Ratio and the Member Short Ratio have moved up quite a bit. The specialists haven't moved as much as the members have, but we can no longer say these sentiment figures are on the side of the bulls.

Another issue I have is with the 30-day moving average of upside volume as a percentage of total volume, which is hovering just above the 50% mark. While this isn't a perfect timing tool, it's now in a zone that says any rallies are likely to fizzle.

Then there are the advance/decline lines. For years I've been tracking the common stocks on the

TST Recommends

New York Stock Exchange

using

Barron's

each week. The main reason I do this is because of all the closed-end funds, bond funds and preferred stocks that are thrown into the numbers of the regular A/D on the NYSE. I've never seen much of a difference in the two advance/decline lines.

However, recently the NYSE restructured the composite index and there's now a way to calculate the A/D using only the common stocks. Since a picture is worth a thousand words, here are the two charts, one with only the common stocks only and one of the total advance/decline on the NYSE. One is pushing to higher highs while the other is still struggling to surpass its March 21 high. That's not to say the A/D line, when using common stocks only is outright bearish, because it's not, but it's not as bullish as the one that includes other securities.

I believe the market needs to do something different here. Maybe that will mean crossing those downtrend lines and making a higher high, but there are now a few indicators -- though not all of them -- that suggest such a rally might just be a false breakout.

Overbought/Oversold Oscillators

For more explanation of these indicators, check out The Chartist's

primer.

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