There was very little selling pressure in the downside whoosh on Friday. The
was down over 200 points and the worst we ever saw the advance/decline line was about negative 600. Add to that the fact that even though the Dow, the
traded to lower lows vs. Thursday, there were fewer stocks making new lows on Friday than Thursday. Even with the Nasdaq down almost 40 points at its worst level, many tech stocks saw precious little selling and higher lows.
This says that perhaps it's time for one more rally. When I first discussed the correction possibility, I said that the momentum of this overbought reading was so great that it would not roll over immediately. In fact, it seemed likely then, and still does today, that we would back off from that extreme overbought and re-rally to a lesser overbought reading, at which point I thought the real correction would set in. I would continue to look for this type of scenario to unfold.
In conclusion, I look for another rally try this week, albeit with less momentum, after which I believe a correction will set in.
(For a complete discussion on momentum and the overbought situation, please see a previous
column of mine.)
New Highs and New Lows
Cumulative Advance/Decline Line
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 the stocks 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