There is a lot of information on this chart  (see below) worth noting, but my primary purpose is to demonstrate how an initital surge off an important price bottom will create extremely overbought indications on short-term indicators (I have circled the examples), but these overbought conditions usually do not result in declines. In fact it is important to note that the indicators are able to contract even as the market continues to rally.

While many analysts view the top of the initial surge as a shorting opportunity, quite clearly it represents a strong initial impulse which signals an important change in direction. Price can be expected to continue higher while the oscillators continue to oscillate. This follows one of the immutable laws of nature that we have identified: "Birds gotta fly, fish gotta swim, and oscillators gotta oscillate." This law has been chiseled into the stone wall of our cave.

The 9-Month Cycle is usually quite reliable and easy to identify, and a rally off the cycle trough is a dependable event. Each cycle will look different and the price low in the cycle doesn't always coincide with the cycle trough, but, when a rally begins at those points, it is likely to last for several months.

Note that the 9-Month Cycle lows in October 1998 were accompanied by a slew of indicator divergences, mostly positive in the traditional sense; however, the sloping divergence on the Advance-Decline Line is not uncommon at important bottoms, and at those times should be viewed as a positive sign demonstrating the unwillingness of sellers to accept significantly lower prices in the face of unusually negative breadth.

--Carl Swenlin, November 3, 1998