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So we got our oversold rally a day early, but right at the exact levels from which everyone said it would come. Now we need to watch the upside to see if it will have the same failures that last week's rally had. I suspect it will, but for now we're still oversold.

In conjunction with that oversold reading, we had yet another oddity in terms of the put/call ratio. Back in May, I noted how, even on up days, the put/call ratio climbed. As a general reminder, when the market rallies, folks ought to be feeling bullish and therefore we should see the put/call ratio sink as more calls than puts are traded. The opposite is true on down days: We should see this ratio rise as more puts are traded than calls.

Back in May, we had many up days with high put/call readings. In terms of sentiment, that tells us that folks were fighting the rally. Well, for the past four weeks, the put/call ratio has been falling on most days.

For example, last Friday, when the market was higher most of the day but headed down in the last hour or so of trading, saw a put/call ratio of 51. That was too low for a down day, and thus bearish. Then Monday's big down day produced a reading of 70. Better than Friday, but it's odd the way people were more bearish when the market was rallying back in May.

The next two days were "average" readings, but then again the market didn't do a whole lot Tuesday or Wednesday. Thursday it rallied, though, and the put/call ratio should have fallen. Instead, it rose to 89, the highest reading since May 29.

In the short term, this confirms the market's oversoldness and the likelihood that the current oversold rally has some more oomph left in it over the next week or so.

However, on an intermediate-term front, the eye-opening weekly sentiment readings from the American Association of Individual Investors were so skewed to the bullish side (i.e. too many bulls) that I nearly fell off my chair when I read them. The bulls were up at 71.43%, and the bears were down at 8.57%.

Granted, I normally don't give much credence to these figures because I think they're more oriented toward trading than investing. But when they get as extreme as this, it's worth taking a closer look. Although I don't have long-term data on this statistic like I do for Chartcraft's Investors Intelligence numbers, I did manage to find the last serious peak reading of 69.3% on Nov. 28, 2001. That date really caught my eye. Why? Just this week, I wrote about that exact same time frame with reference to the bonds.

So now two statistics are telling us we're probably in a similar place for the market: We've seen the bulk of the rally, but because tops take a long time to form, we're very early in its formation. In late 2001/early 2002, it took an additional four months for the market to top out.

Overbought/Oversold Oscillators

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

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.