The markets had a strong comeback in the afternoon, recovering from early losses and closing not far off the highs for the day, a terrific recovery for a Friday.  But it smacked of short covering  and was fairly narrow in scope and we'll see if there's any follow-through Monday.

The day started out with a move down, and rather sharply, that took us to the session lows by within an hour or so.  They staged a recovery rally in the morning that was a bit slower and more tedious.  That rally failed at resistance twice before breaking through in the afternoon.  When that occurred, the markets accelerated.  Only a last half-hour pullback kept them from closing at the highs for the day.

Net on the day, the Dow was up 35.70 and about 100 points off the earlier low.  The S&P 500 was up 3.20 and closing at 1267, which is a key resistance level.  That was 12 points off the low.  The Nasdaq 100 also reversed by 26 points, closing up 9 1/2.  However, the SOX was down 6.44 today and pressured Nasdaq for most of the session. Although that was 8 points off the low, recovering from a big early loss.

The technicals were flat with advance-declines exactly even on New York and negative by 260 issues on Nasdaq.  Up/down volume was 8 to 7 negative on New York and 11 to 8 positive on Nasdaq. Total volume on New York was 1.7 billion and less than 2 billion on Nasdaq.

TheTechTrader.com board was extremely mixed, with issues on both sides.  The leader by far was old trading favorite, Air T (AIRT), which exploded on an earnings report that came out mid-day, and jumped 3.20 on 1 2/3 million shares.  Very heavy turnover for that stock.

Apple Computer (AAPL) snapped back from recent losses, up 2.36, and Pacific Ethanol (PEIX) jumped 1.25, closing at 18 on good volume.

Other stocks of note on the plus side, Parlux Fragrances (PARL) was up 92 cents, Evergreen Solar (ESLR) up 53 cents, and PW Eagle (PWEI) up 32 cents. TradeStation (TRAD) gained 27 cents.

Nuance Communications (NUAN) jumped 70 cents on 3.4 million shares.

On the downside, the loss leader was Energy Conversion Devices (ENER), down 1.70, although that was about 1 point off the lows.  Other losses were Dynamic Materials Corp. (BOOM) down 1.16 and Bentley Pharm,(BNT) down 1.31.

In addition, AVI Biopharma (AVII) gave back 65 cents, DayStar Technologies (DSTI) 45 cents, Viisage (VISG) 48 cents, and Rediff.com India (REDF) 39 cents.

Stepping back and reviewing the hourly chart patterns, the significance of today's early decline was that we made new pullback lows on the Nasdaq but did not get confirmation from the S&P and Dow.  That positive divergence may have been what triggered the rally.  It was a very strong move in the afternoon.  Obviously, the potential for a low is in if we get some follow-through early next week.

Good trading!

Harry Boxer is a technical consultant to many Wall Street hedge funds and large institutional traders, and author of TheTechTrader.com, a real-time diary of his day, swing and intermediate-term trades. For more of Harry Boxer, sign up for a FREE 15-day trial to his Real-Time Technical Trading Diary, or sign up for a Free 30-Day Trial to his Top Charts of the Week service.