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Breakfast with Brodsky


Good morning, as we head into the first full week of the New Year the futures have a touch of strength to them. Siebel just positively pre-announced and the question now is will this be the first in a string of companies to follow suit? Earnings season is but a few weeks away and as we draw closer you can bet attention will gravitate towards many companies' eagerly awaited numbers and more importantly guidance, which will give us our first insights into what 2004 may bring.

Scanning the major indices it is easy to see that December brought a fair amount of buying as the Dow tacked on almost 1000 pts from its late November low. The S&P has added almost 100 pts from its November low and the NDX finally broke out of its three-month range. With the first full week of business, fresh money in hand, and a brand new year ahead of us, this January is certainly shaping up to bring us some action.

Taking a closer look at all three major indices we see that over the past four trading sessions consolidation has been the name of the game. The longer we trade sideways the more dramatic the move could be when we break out or down. On a short-term basis watch 10,460 on the Dow as resistance and 10,400 and then 10,325 as support. The S&P levels are; resistance 1112 and then 1118 and we find support at 1105 and then 1096. The NDX is also tracing out a tight consolidation pattern where resistance is 1475 and support is 1459.

Looking at a slightly bigger picture of the indices we can draw a number of conclusions. After a month of rising indices, both the broad market (Dow, S&P, NDX) and also certain sectors have been rising steadily as well (BTK, BKX, XOI, DRG, CYC.) As new money is going to be put to work we could see funds flow away from strength and into more lagging sectors. With a dollar that continues to slide, energy prices that are rising, a rate hike that may or may not happen, and a shaky global playing field, one could argue that investors may want more defensive sectors in 2004. I think the money flows over the next few weeks will be important because it will allow us to take a glimpse into people's perception of what 2004 may bring and what may outperform over the next year.

Good Luck.
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