BULLISH ARMS

Dick Arms' column on realmoney.com just up and he is bullish for a trade. Here is what he says:

"The very oversold condition we were looking at last week and going into this week has led to a spectacular and very rapid advance in the last two days. Such an advance was to be expected, if only because we were so oversold according to the Arms Index numbers. Now, after regaining part of the decline that started back in May, the question is whether it is just a relief rally or something that has further to go. "

"Actually, I think it is both. The relief rally is apparent. But we are still quite oversold by most measurements. The move probably has gone too far too fast, so some resting, at least, over the next few sessions is likely. But after such a big decline and with such extremes being reached in my indicators, I feel the rally will, after a rest, push further."

" In the last two days, two very bullish numbers -- Thursday's was one of the most bullish numbers in history -- have entered the series, pushing the five-day well away from its extreme of just the day before. On the other hand, the 10-day is still very near the extremes. And the 21-day (not shown here), which I use for longer-term projections, is at its most oversold in two years. "

"My conclusion is that there is going to be more on the upside, but perhaps some hesitation first. Therefore, if you have not already gone long because of the extreme oversold condition of last week, a strategy might be to wait a bit, but buy on a pullback. "

That sounds like a good strategy, especially with the gap down we are looking at in the SP Futures this morning. I think this gap will get bought (78% chance of gap fills on Fridays per Carter) and then we probably meander near the unchanged line for most of the day.