The Daily Chartist

Helene Meisler updates her four market indicators.
Author:
Publish date:

May 13

The

Rubin

resignation decline was one of those events that take the market down in a whoosh, while individual stocks choose to ignore the news. So many of those stocks that have been correcting for the past several weeks actually held and did not make lower lows yesterday. In the very short term, that can help the market continue its climb. However, it is unlikely to sustain an upside breakout at this time.

Take a look back in October/November on the overbought/oversold oscillator. We reached a maximum overbought in October; the oscillator came down from that reading, but the averages did not. Then the oscillator gets to a point (point A) from which it rallies, but since it is unprepared to rally well from that point, the rally takes the averages higher, while many stocks fail to achieve the same goal. In the process, the oscillator gives us a lesser overbought reading, which is when the market gets exhausted and can go no further without a meaningful correction.

Point B shows where we are now. We can continue this rally for a short period of time, but it's likely we will then reach a lesser overbought reading, sending stocks into a meaningful correction. By meaningful correction, I mean that stocks may fall further or they may simply come back to the bottom of the trading range. Either way, the upside is limited at this point.

New Highs and New Lows

Overbought/Oversold Oscillator

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

KPMHSM@aol.com.