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Breakfast with Brodsky


Can someone say reversal? The markets climbed all day yesterday, which, in my opinion was sparked by nothing more than oversold conditions. Both the S&P 500 and the Dow were able to make new 52-week highs after spending the last eight trading days consolidating. With the futures slightly bid up this morning it does look as though we will have some follow though. Will we hold? Will we be able to catapult to new levels and break away from the 1070 level that has been holding us back?

Before we all rush out to the new Dow 10,000 parties that will be thrown all over town let's take a look at today's agenda. At 8:30 we have the release of some November economic numbers. We will get both the Producer Price Index and PPI (ex energy and food) and we will also receive the current Trade balance numbers. Then at 9:50 we have everyone's favorite indicator, the University of Michigan Confidence number! In my opinion, that number is meaningless. But it may move the market and we all know that no matter what WE think, the only opinion that does matter is Mr. Market's.

Technically speaking yesterday was a productive day. One of the themes of the past year has been this market's incredible ability to rally back after sharp pullbacks. Is this going to be another sustainable V bounce? Are higher prices in our future? Only time will tell, but with option expiration next week and the New Year shortly after that, one can gather that there is a lot of money out there that wants to hold this market up.

I do have to hand it to the bears though. They certainly do not give up. I keep hearing the same things, "This market doesn't make sense!" When does it ever make sense? At some point, every trader says that (I say it daily.) This is code for I am not making money. Another favorite is "The longer we go without a meaningful correction, the nastier it will be when we get it." No kidding! This is true but this "correction" could come in five years, or it could come next week. The best part about saying this is when it does happen, and it eventually will, everyone will claim how they predicted it! But they don't tell you that by waiting for it they missed one of the best market rallies in recent times! A wise man told me there are two kinds of people on Wall Street: those who want to be smart, and those who want to make money. Which one are you?

As we move to new 52-week highs in the S&P and the Dow, we have new levels to look at. We have not totally broken out yet so 1070-1075 is still going to be resistance. Support will remain at 1060. In the Dow we have the ever-important 10,000 level (sarcasm) as a magnet right now. Even though 10,000 does not represent anything important technically, everyone is looking at it. So therefore it is important. To quote the immortal Gordon Gekko, "The perception has become reality." Same theory applies to Dow 10,000. Look for support at 9960 and resistance is yesterday's high of 10,026. The NDX will be experiencing some rebalancing at today's close so be prepared for some volatility. Look for 1426 to be immediate resistance, and 1400 to act as support. A break above 1425 could push us back to 1450.

Most indexes finished the day in the green; even the super beat up Retailers. With the S&P and Dow making new 52-week highs and the NDX pressing up against a big breakout level it may make more sense to get your trading cues from the overall market action. Watch the big levels and try not to get bamboozled by market noise as we attempt to make a solid breakout here.

Good Luck.

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No positions in stocks mentioned.

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