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Breakfast with Brodsky


Last night was a busy one for me and I did not get home until about 10:30. I signed on to my computer to check what was going on in Asia before heading of to bed and I got an instant message from a friend and it said, "Someone just tested positive for SARS in Taiwan." Yes I know, some of you are saying "Didn't we already go through this?" We had a case back in July and it was contained to one person! This is not a big deal! Currently, the person who did contract SARS has quarantined himself and the Chinese government (who is always open and honest) said there appeared to be little risk of infecting the public. This appears to be more headline risk related so far, but if SARS does break out again in the region, it could spell trouble for Asian companies both tech and non-tech related. This is something to keep an eye on.

With the exception of SARS I see very little BIG impact news this morning although last night two pieces of news caught my attention. The first being that over the course of the last week Michael Dell sold 10 million shares of stock. Yes I know he has another 237 million shares and he probably sold for any number of reasons, but let's ask why did he sell now? I know I am going to get a bevy of emails in regards to why he sold, the reasons behind the sale, and how it's not a BIG deal. Sounds like a lot of rationalization to me.

Every time a director, or founder of a company sells, it sets alarm bells off in my head. The reason why is easy to understand, they know what's going on better than any analyst out there. It's that simple. Are they going to pick the top? No. But ask yourself if they would sell at the bottom of a cycle or somewhere near the top.

The other piece of news that I noticed was that the Orbitz IPO priced! I mean come on, do we need another publicly traded travel company??? I may be going out on a limb here but I truly believe that this is a classic distribution period. Distribution periods can last a long time and personally, I think the market is going higher into Q1 and Q2 of 2004. Why? The semi cycle is still improving, a weak dollar is helping multis (almost every company is a multi now), and it is an election year. A wise man once told me that the market can be wrong for a lot longer than your funds can last. Lesson? Don't fight the tape but at the same time be aware of your surroundings and of the type of market you are trading in.

If we look at what outperformed in yesterday's market we can quickly see that it was the big boys of the Dow. I have probably been boring you with my mention of Caterpillar (CAT: NYSE), United Tech (UTX: NYSE), 3M (MMM: NYSE), IBM (IBM: NYSE), and Proctor and Gamble (PG: NYSE) but take a look at these guys! They are not pulling in and in my estimation will finish 2003 higher than their current levels. The DOW was strong all day and the S&P was flirting with 1070 al day before deciding to rally to 1075. Watch 10,135 level as resistance in the Dow and 10,046 as the first support level. The S&P levels are: resistance, 1075 and then 1083; support, 1068 and then 1060. The NDX was able to rally from its lows and close a tad over 1400. Its 50-day lies at 1409, which will be the first resistance level. Support is at 1397 and then 1383.

Again, keep in mind it is close to year-end and every day feels like a Friday in the summer. The volume is light, trading is wild and choppy, and trading personal seems to be gone. Stay light and let the tape tell you what to do. Don't be so stubborn and let the last two weeks of the year eat away at your hard earned gains.

Good Luck.

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position in Caterpillar, 3M

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