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Breakfast with Brodsky


Good morning. As we head into the last week of January, we can anticipate more earnings related news, a FOMC meeting, and the release of many economic figures. We closed out the previous week with the S&P having tried to break out of the 1150 level where it failed three days in a row. The NDX spent much of last week pulling back from its high of 1559 to its closing value on Friday of 1531. The Dow, while still in an uptrend, is struggling to get above the 10,600 level and could be losing some of its steam.

As we prepare to close out the first month of 2004 we can see this year's business landscape starting to shape up. Earnings for the most part have been within expectations; we are seeing some large M&A deals, and sector leadership has switched. We are seeing large mutual fund inflows, and there are still a healthy amount of skeptics calling for a top. So where does this leave us?

I will not deny that there are certain stocks out there that may be a bit "frothy" as people like to say. But these few stocks are not representative of the whole economy and I would think that in order for a toppy, bubbly environment to exist, we would need more of these stocks out there as well as an economic outlook that was more bullish. More bullish you say? Yes more bullish. There are still a number of areas that people can point to which may be cause for concern. In my opinion, we need people feeling much more secure about their future for a top to be in place.

I briefly touched on the levels of the major indices above. The S&P is still in an uptrend and look for 1150 to be resistance and look at 1134 and then 1121 to be support. The Dow support exists at 10,500 and then 10,425. Resistance is at 10,650. The NDX support is at 1514 and a trade above Friday's high 1546 could push this index higher.

The BTK tested and held the 520 level on Friday. Look for support at 516 and resistance is at 530. The SOX continued to fall and tested its 38% retracement from its Dec. low to its Jan. high which is 525. Look for support at 525 and then at 514, which is an intersection of its 50-day MA and a 50% retracement.

The BKX pulled back on Friday and closed below 1000. Look for support at 988. The OSX was able to power ahead and close decisively above 100. Look for 100 to be support and Friday's high of 104 to be resistance. The DRG closed below 340 which is now become near-term resistance. Look for support at 336 and then 334.

The HGX traded towards its upper range and failed to breakout to new highs. The index failed at 371, which is where it failed twice in December and once in January. A trade and close above 371 could put this index back in favor and into another leg up. Look for 360 and then 350 to be support. Lastly, the XAU pulled back some more on Friday and closed below 100 again. Look for the 96-97 level to be support and a trade and close above 100 could put this index back in an uptrend.

Good Luck.

No positions in stocks mentioned.

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