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Breakfast with Brodsky


Good morning. We are one day closer to the end of 2003 and although I can't imagine it, today may in fact be slower than yesterday! The action yesterday may have been slow, but the charts of the major indices couldn't look healthier. The Dow and S&P look like they could finish out 2003 on their highs (although they are starting to trade into the overbought area) and the NDX looks ready to regain leadership any day now.

The thin, listless, erratic trading that we have been experiencing is indicative of end of the year trading. My interpretation of recent action tells me that people are expecting the markets to drift higher into the end of the year and very few people are going to try to stand in the way of letting this happen. 2003 belongs to the bulls and with a week to go it seems as if the bears have resigned themselves to this fact. There will be plenty of time to sell stocks in 2004 and after a long arduous year, it seems as if the bears want a vacation, after all, they must be verklempt (Yiddish for choked up, overcome with emotion [not joy though] just overcome) from such a trying year.

January is certainly setting up to be an important month for many reasons. We will get a slew of economic data, earnings will begin to be released in a matter of weeks, and once again we will pick up our swords and do battle on that field we call the marketplace. People often say that January sets the tone for the entire year and that may be truer this year than in the past.

The S&P and Dow were both able to close at new 52-week highs. Look for support in the S&P at 1085 and in the Dow at 10,247. With the futures trading down small, look for resistance to be yesterday's highs, which are: 1092 (S&P) and 10,338 (Dow.) The NDX is bumping up against the 1435 level, which has capped its move over the last three days. A trade above this level could push us back to 1453 and maybe ever higher. Look for support at 1419 and then at 1400.

The BTK (Amex Biotech) continues to trace out the cup & handle formation that I mentioned yesterday. Watch a break above resistance, which is 480, because that could send the index into the 490 level and quite possibly to 500. The SOX (Philly semi) traded in a tight range and was unable to breakout. Resistance continues to be the 500 level and look for support at 484-480.

The banks (BKX) traded higher yet again and were able to make a new 52-week high. In my opinion, as long as this index continues to act well, the entire market may follow suit. Watch 956 for support.

After two days of consolidation the OSX (oil service) looks like it could go higher. A break above 94.79 could be the catalyst to take this index to the 96 level. Look for support at 93.25. Retail (IRH) stalled a bit yesterday and after consolidating for the past two days, a trade above 89.16 or below 88.14 could jar this index pretty hard.

The DRG (Pharma) is tracing out a cup & handle similar to the BTK. Watch the resistance level of 329, a trade above could break this index out. Lastly, the XAU (gold/silver) is at an interesting crossroad. From its October lows to the December highs, it has retraced 38% (103.19) of that move. The 38% is slightly higher than the index's 50-day MA (101.57) and the 50% retracement level is 100.27. With three important support levels so close to each other one could gather that the XAU could be ready to hold these this level. A trade above yesterday's high of 104.25 could spark a bounce in this sector.

Good Luck.

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