Breakfast with Brodsky
Technically speaking, the major indexes have experienced a bit of consolidation over the past five trading sessions. The SPX for instance has traded in an eighteen-point range for the past week. This consolidation certainly cannot last forever and we will breakout or breakdown and the question is: what is going to be the catalyst? Is it going to be the economic numbers due out this week? Will rallies continue to be sold as more and more funds sell to hedge out gains as we near year's end? Only time will tell, and in my opinion by watching the technical action we may be able to read where the market is going.
In the SPX, 1034 is serving as support and 1044 continues to be resistance. I think that a close either below support (1034) or above resistance (1044) will carry the market in that direction for a few days so watch for follow-through. In the Dow those levels are: support at 9600-9615 and resistance is at 9700-9715. The NDX was able to climb off its lows and make a strong push into the close. Watch for support to come in at 1360 and supply to enter the market in the 1390-1400 range. The lack of catalysts should make for some wild trading today so watch the levels and play them closely.
The BTK (Amex Biotech) has been consolidating over the past week and Friday's trading range was the tightest in nine trading sessions. The sector seems to be comfortable holding the 440 level and a trade above 450 may break it out so watch for some follow-though to the upside above that level. The SOX (Philly Semi) has also been consolidating and seems to be in a slight downward channel with the bottom at 492 and the top at 508. Be mindful of these levels because there will surely be some follow-though on a breakout above 508. The BKX (Philly Bank) held in very well and is trying to turn higher. Near-term resistance is at 935 and a trade above should push the BKX higher and the overall market that way as well. In my estimation, a close above this level would be an even bigger positive. On the same token, the XBD (Amex Broker/Dealer) may have ended its five-day slide and could be turning higher. Watch 600-605 as the support level and a strong push above 615 may push this index back up to test its 50-day MA which is at 629. The XOI (Amex Oil) and OSX (Oil Service) have been a source of weakness in the past few sessions and a break below 485 in the XOI may push the entire sector lower. The CYC (Cyclical Index) has been consolidating at the 600 level and a trade above 603 should send demand into this sector. The DRG (Amex Pharma) has been under some pressure during the last two trading sessions and the fact that the Senate is debating the life of the Medicare bill may provide increased volatility here so be cognizant of that. Good Luck.
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