Breakfast with Brodsky
Good morning. After yesterday's climb we wake to find the futures trading lower off news that multiple explosions rocked Istanbul Turkey. As soon as this happened the European indexes turned lower as did our own futures markets. Clearly, this will be the lead news story of the day as this is the second set of attacks in Turkey in less than a week. As our own markets, and those abroad, have been trying to gain footing in the last few trading sessions, one can only imagine that this news is not whetting investor's pallets. Keep in mind that these threats and these terrorist attacks are nothing new as we have been dealing with them since September 11, 2001 and most recently, the markets have been shrugging this type of news off.
Yesterday's technical action was somewhat encouraging as the SPX held the 1035 (November 17 and 18's low) and rallied back to close at 1042. If you look at a twenty-day chart on the SPX, one can see that between Nov 03 and Nov. 14 1060 was resistance and 1044 was support. Over the past three trading sessions it seems as if we have entered into a new trading range where 1044 is now resistance and 1035 is support. I know there is a difference between a trading range that spans ten trading sessions (11/03-11/14) and the most recent trading range (three sessions) but the results of a breakout or breakdown will be the same. Is this a pause before we go higher? Are we going to be able to hold what appears to be another test of 1035?
Lately, in my opinion, there seems to be an increased level of nervousness among traders these days. The issues that are being discussed are not just confined to whether or not companies will make their numbers or increase IT spending, but rather where the US Dollar is going and why it has been falling, why Gold is being bid up, what is going to happen to the housing market when rates are raised, and a whole host of other macro concerns. Will these issues abate from traders' minds as more corporate news comes out in the coming weeks (i.e. mid-Q updates, earnings)? Only time will tell, but it is important to be cognizant of what current issues are prevalent in peoples' minds.
The Dow was able to hold support of the 9600 level (low tick was 9614) and went on to close near its highs. A break above yesterday's high of 9707 would be positive and push the Dow to 9770-9800. If we breakdown below 9600, look for the next level of support to come in at 9500 (10/24 low.) The NDX also held Tuesday's low of 1364 and closed right below its 50-day MA of 1390. Look for 1390-1400 to be the resistance level and support is at 1344 (10/24 low as well as the where the gap was made in Oct.)
The BTK (Amex Biotech) held 440 and if it can trade higher a double bottom might be in place, which could push the index back to 460. A triangle pattern has formed in the BTK with 435 as support and 463 as resistance. If the index can trade through either of these levels watch for a breakout or breakdown. Semis acted well and showed good strength all day. The SOX (Philly Semi) held the 500 level and if it can push above 511, it would appear that we are headed back to 531, its 52-wk high. The highly watched BKX (Philly Bank) index touched its 50-day MA (918) and bounced higher to close near its highs. Support is at 918-920 and resistance is at 936. The XBD, broker/dealers, im my opinion, look like they may be turning the corner and might be ready to trade higher. Watch for 607 to hold and if it does we could trade back to the 623-626 area. Pharma acted well and is holding the top of its range, a break above 326-327 should send the DRG higher. Gold stocks (XAU Index) continue to move higher and after opening on their lows, they went on to close at their high. These stocks are clearly leaders and one might expect higher prices here as well.
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