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Breakfast with Brodsky


Good morning. Decliners outpaced advancers and the market gave back some of the gains that were achieved on Monday. With the FOMC to announce their decision today, more earnings, and a durable goods report due out; we could be in for another choppy day. While tech was the laggard yesterday, some upbeat tech earnings releases that came out last night are causing the futures market to be bid up this morning.

This earnings period has been pretty benign in terms of extreme market swings. The last few earnings periods have been marked by painful downdrafts while this one has done nothing but lend a hand to an already strong, trending market. With the S&P having risen 1000 points since its December low without a correction, I am getting a bit nervous. My nervousness exists in the short term because I do believe we will be headed for higher broad market returns again this year.

Charts don't lie and neither does Mr. Market. I wrote yesterday that this market is certainly in an up-trend and that fact is undeniable. I caught some flack for that as a slew of bears rushed in to say that type of writing occurs at market tops. Was I calling for an "all in" move on the long side yesterday? No. In fact I stated that point to illustrate that the boat may be loaded too heavily on one side. I then went on to state what type of buying I thought was pushing the markets higher and I offered the opinion that retail related buying might be pushing us higher. Another cause for concern. With a poor market performance it appears many people share this same concern.

The S&P failed to hold above the 1150 level, which was one cause for the markets to grind lower throughout most of the day. Although Monday's low of 1141 was not breached it feels as though more concern has shifted into the market in regards to a correction. The two levels that I am paying attention to (as I am sure the entire market is as well) is (1) Monday's low of 1141 and (2) 1132 which is where we topped out in early Jan before making the move to 1155. If the S&P closes below 1141 the nice and neat move higher which we have experienced could be in for a rocky road.

The NDX has been in a holding pattern for most of January. The support level being 1513 and the top of the range is at 1555-1560. It appears that since mid-January we have been in a slight downward move with a clear descending trendline putting resistance at yesterday's high of 1552. Look for support at 1513 and then at 1500. If we are able to close above that trendline resistance of 1553 the recent trading range would be cleared and higher prices could come.

In times of uncertainty I prefer to look at the bigger picture to derive my ideas/thoughts and that is why a review of the sector indices was not conducted. Good luck.

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No positions in stocks mentioned.

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