March 23, 2000

Don't faint, but the


actually had more stocks making new highs Wednesday than the


did. And that was the second day in a row! I believe that speaks of the continued improvement on the NYSE as selloffs help this market improve.

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Over on the Nasdaq, the paltry number of stocks making new highs tells us a lot about this rally: It is pulling stocks higher, but many will have difficulty surging back to new highs after losing so much ground last week.

Even the level of oversoldness is telling us the same thing. This indicator hasn't broken through to such a low level since last August. Such a move typically means a big oversold rally followed by another move down to a higher low.

After rallying in mid-July, for example, the Nasdaq took a serious drop at the end of July and into August. It then rallied from that deeply oversold level, only to drop down again in September -- but this time to a higher low. This sequence of events becomes pretty standard once the oscillator breaks to a new low.

Therefore, while I expect this oversold rally has further to go, it is more likely that when it gets overbought we will have another whoosh down as a test of this recent oversold level. Sort of the same way we had two whooshes down in January, making each time down a good buying opportunity.

New Highs and New Lows

Overbought/Oversold Oscillators

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 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