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Breakfast with Brodsky


As we enter into the final week of 2003 one can expect a week similar to last. Light volumes, choppiness, and a general "window-dressing" bid will all be characteristics of this coming week. We can look forward to the Help Wanted Index (today), Consumer Confidence, Existing Home Sales and the Chicago Purchasing manager (Tuesday), Jobless Claims (Wednesday) and ISM Manufacturing (Friday) all being released this week.

People have already begun looking forward to 2004 and the talk on TV and in some publications is how the story of next year is going to be the Fed raising rates. Is one rate cut going to mark the top of this rally? Is THAT it? Will it be over once that happens? Well for one thing I think since it is widely believed that this will occur, it has lost some of its prowess as a huge market mover. The market has a funny habit of pricing everything in before it occurs.

Secondly, we are a few weeks away from the heart of earnings season. Will corporate profits continue to expand at a healthy rate? Is this quarter going to set the tone for the first half of 2004? Will we see a pick up in corporate spending? Maybe this quarter the consumer will finally be off the hook as the main economic driver and some of these companies will be able to justify their valuations. Bottom line; we have come a long way in 2003, are we now going to get the fuel needed to keep it going? Only time will tell but one thing seems sure, the near term trend in my view, is definitely higher, and as long as you keep seeing headlines on the covers of magazines and papers that have a bearish tone, we are not topping out anytime soon. Too many people are still trying to pick a top.

The major indices look healthy and after consolidating over the past three days, they could be headed higher. In the Dow, a trade above Friday's high of 10,343 could trigger a breakout. The S&P has also been consolidating and a push above 1097 could break it out above 1100. The NDX, which has yet to break out of its three month trading range, is on the brink of what could be a major breakout. A strong trade and close above 1453 could break the index out and that is a major level to watch.

The BTK (Amex Biotech) is stalling at its early December high of 488-490. A strong breakout above this range could push it to 500, look at 480 as support. The SOX (Philly Semi) is having trouble getting through resistance at 500 and recently has been trading in a tight range. A break above 503 could put this index back on track to make a run at its December highs of 534. Look at support at 491.

The banks (BKX) have been in a tight range as well and a trade above the 963 level could push it into a third wave higher. Look at support to come in at the 956 level. The OSX (Oil Service) continued to consolidate in the 94 range. Resistance is 95 and support is 92.50-93.

Lastly, The XAU (Gold/Silver) seems to have turned the corner and could be on its way to test 110-112, its 52 week high. The index tested its 50-day (102) and held. 102 will remain as support and look for 108 to be near term resistance.

Good Luck.

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