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Breakfast with Brodsky


We saw Gold explode, the US Dollar continue to slide, and all three of the major indices rip to new 52-week highs! What a day and the end of the year is shaping up to be as incredible as the year itself! There are plenty of people that want to put 2003 to bed and can't wait for 2004 to arrive because rationality might return to the marketplace. I love these people! The people that think that a rising market is ridiculous and that in 2004 the market will be sold off and once again that things will make sense. Phew! I don't know about you, but I hate making money in a runaway market and I hope it ends soon! (sarcasm)

Whether the market makes "sense" or not, there are chances to make money in every market. That doesn't mean that we are always able to capitalize on them though! I for one am making a New Year's resolution to push myself harder and to trade more opportunities in 2004. Whether the trades are bearish or bullish is yet to be seen, but I think a key component to having a successful 2004 will be flexibility. The bull was able to bail us out of most positions over the past year but I think things may get a tad more complicated in 2004.

While the market does its end of the year dance to make everything look good, the easy trade would be to think that a pullback could be in store. I would guess that this may take the form of consolidation and we could get bid up even further into earnings season, which is right around the corner. Look for support at 1095-1100 in the S&P, 10,310-10,340 in the Dow, and 1450-ish in the NDX.

Many of the sector indices are heading into resistance areas and that does support the thesis for a short-term market pullback. Let's take a look. The BTK (Biotech) continues to grind higher and is approaching 500, which is where the index peaked in September. Look for 480 to be a good support area. The SOX (semi) was able to trade and close above 500, which has now become support. Look for 516-519 to be the first level of resistance and then 530-ish after that.

The banks (BKX) continued their fantastic run closing at the day's and the year's high. Support is at the 960-964 area. As long as this sector continues to trade higher it is hard to imagine that the market will not follow. The Oils (OSX and XOI) continued to push higher as well. They have had an incredible move in the month of December and one could imagine them closing the year at their highs.

Retail (IRH), Pharma (DRG), and the Cyclical (CYC) stocks continued to push higher as well. Lastly, it looks like the XAU (gold/silver) reversed and was able to close near its 52-week high. Look for support at 108 then 106 and resistance lives at the 111-112 area.

Good Luck.

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