A Tunnel-Vision Market

 | May 03, 2013 | 6:00 AM EDT
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Note: Helene Meisler has off Monday. Her next column will be Tuesday, May 7.

It's been a long time since I've been able to say, based on my Oscillator, that the market is overbought. In fact, the last time had been mid-March, when an overbought reading came off the rally from that late-February swoon. The S&P 500 had been at 1560, and the market had chopped itself to death for two weeks -- then it popped and dropped to 1540.

The current overbought reading, meanwhile, arrives off the low from two weeks ago.

Overbought/Oversold Oscillator -- NYSE

Since this Oscillator is based on the 10-day moving average of the net of the advance-decline line, we can take a look at the numbers set to be dropped for the next week. As you can see, there isn't a red one among them. In order for the market to get more overbought, this indicator will need to see better numbers. Of course, in this market, that probably wouldn't matter when it comes to procuring any chance of a pullback.

In this market, it probably doesn't matter that, on the Nasdaq -- which saw a brand new high Thursday -- we've seen a downward trend in the number of stocks making new highs. From Monday through Thursday, the number has declined from 154 to 153 to 131 and, finally, to 115 Thursday.

In this market, it probably doesn't matter that, if we add up the Nasdaq's statistics for the last two days, we get the index up 12 points and net volume at minus 20 million shares. As I noted the other day, I actually liked the breakout in the PowerShares (QQQ), as it measures to $73-ish. But I do not like the statistics that go along with it.

In this market, it doesn't matter that the Russell 2000 and the Dow Jones Transportation Average failed to regain Wednesday's losses. It doesn't matter that the KBW Bank Index has done absolutely nothing for three months. In fact, on Thursday a reader asked me if these copper statistics mattered: Whenever the price of copper has fallen in the last decade, they pointed out, the S&P has shortly followed suit. Well, I figure it will only become important when the universal mantra becomes, "Copper doesn't matter anymore." That hasn't happened yet.

Someone else asked about how U.S. Treasury yields haven't lifted. This hasn't mattered, either, has it?

Then someone sent me a note on a tech stock that was down 7.5% on the day, noting that he thought it should have a lot more downside potential from the current level. I looked at the chart and then I asked him whether he said the same thing about IBM (IBM), or Qualcomm (QCOM), or Oracle (ORCL). The pattern is consistent: a gap down that starts to find its footing within a few days -- and then, another bounce higher.

Now, the employment number is due out later Friday morning -- and I see that many folks believe the market will climb whether it's a positive or a negative report. I think that is what they call a win-win situation. Maybe that's why the equity put-call ratio sank to 55% Thursday? Everyone is banking on the win-win just as the market gets overbought.


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