THE CLOSE

The markets recover and put on an end of day rally taking the QQQQ back up to the 37.65 area after putting in the Cody bottom at 37 and change. I guess its a start. The SMH was the star of the day as the ETF climbed over 3% to close over 32 after bottoming (for now) in the 31 area. These moves may not seem like much but both of these ETF's have been dripping lower day after day.

Dr. Brett had this to say about the recent lousy Arms Index readings on the NAZ and his work says a short term rally is likely:

"We've seen heavy selling in the NASDAQ 100 Index (QQQQ) over the past four days, with the NASDAQ TRIN (Arms Index) averaging a whopping 2.15. Since March, 2003 (N = 842 trading days), when the four-day NASDAQ Arms Index averages over 1.5 (N = 71), the next four days in QQQQ average a very solid gain of 1.29% (50 up, 21 down). That's much stronger than the average four-day gain of .13% (411 up, 360 down) for the remainder of the sample.

By now, we've learned that patterns can shift. So I looked at the four-day NASDAQ Arms Index pattern since 2005 to see what has happened next. When the four-day Arms Index has exceeded 1.5 (N = 18), the next four days in QQQQ have averaged a gain of .62% (13 up, 5 down)--again much stronger than the average index performance. Interestingly, the edge has seemed to be on a multiday basis; the next trading day, we don't see a bullish edge."

I took a flyer this afternoon on the IBB thinking the index has been beaten up so much any news from DNA will be seen as bullish. It won't be long to know that answer.