Well, I'm sure if you took a poll Thursday morning and asked what sort of day lay ahead, the overwhelming answer would have been "flat." I know I surely would have said that. With the Intel ( INTC) report and this morning's employment number looming, we would typically see a quiet day, so that rally really was surprising.

But as surprising as yesterday's move was -- in terms of how much the averages moved prior to these big announcements -- what was more interesting was how that Russell 2000 buy program mistake from a few days ago has managed to skew the statistics on the Nasdaq.

I mentioned this yesterday as a possibility, and now it seems to be a reality. That surge in the number of stocks making new highs during Wednesday's action might just prove to be a peak reading. The Nasdaq saw 105 stocks make new 52-week highs on Wednesday when the market was essentially flat all day. Then yesterday, when the market was up, up and away all day, the number of new highs was a mere 54.

It's not just that yesterday's reading was half that of the day before. It's also that with Nasdaq making a new high for this rally, the reading of 54 is just three stocks more than the Aug. 23 reading when Nasdaq was only at 1838. This is a negative divergence. Problems are clearly beginning to develop.

In addition to that, the oscillator, which was already hovering in overbought territory, did not manage to make a higher high yesterday. We now have another minor negative divergence. And based on the way the math works out, it is unlikely to manage a higher high even if the market is up Friday. (This is being written Thursday night, well before we know what the employment number is.)

Overbought/Oversold Oscillators

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

This is not to say yesterday's rally was unimpressive. This is not to say yesterday's rally was simply more of the same. This is to say that a decline here would not be surprising. However, as I said yesterday, I don't expect this rally to be over until the intermediate-term indicators begin to roll over, and so far they continue to climb.
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 hmeisler@thestreet.com.

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