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Breakfast with Brodsky


So the wait is over! We got Intel's (INTC: NASD) mid-quarter update (which in my mind is more important than the jobs data due out today) and regardless of what they said the stock is trading down about 3%. Over the past months we have had a few INTC-induced rallies. During those rallies, Intel would open up about $1 and then continue to travel higher throughout the duration of the day. Is the opposite going to happen today? Will Intel stay down and close on its lows? Will other semis be dragged down in sympathy? These are the things that I am going to be focusing on today because for the first time in a while we may see a change in investor/trader psychology.

It doesn't take much to see that we are already in shaky ground. We have seen stocks completely fall apart over the past few days. Some small-caps, which have been outperforming this year, have been sold in the recent trading days as well. We are seeing high flyers such as Career Education (CECO: NASD) and the rest of the online educators, Jet Blue (JBLU: NASD), and SanDisk (SNDK: NASD) begin to crumble. These stocks have been sold down on tremendous volume in the past few days. What does that tell us? It may be a sign that funds are starting to unwind positions in high beta, high priced names. Keep an eye on these names (and any other that fit the high beta/high price parameters) and see how they have been acting. Are they giving us signs of a breakdown as well? Since these names were the first to turn higher they may be the first to turn lower.

The action in the S&P yesterday was quiet volatile. We tested 1070 (we have crossed above and below this level eight times in the past four days) at around 11:00 and then sold off until the market double bottomed in early afternoon before trading higher into the close. We closed at about 1070, which appears to be healthy. If one was to look at a chart on the S&P it does look bullish. A strong trade above 1070 should push us to new highs. Is this going to happen? It might! One thing we do know is that we have a super volatile trading market where many traders are nervous and lack conviction on which way we are headed (I am one of them!) In the S&P watch 1060-1063 to provide decent support and 1070-1075 to be the top of the range. In the Dow look for yesterday's close (9930) to be the top of the range. A trade above that level should push us higher (Dow 10,000?) The NDX was able to rally back as many technology stocks ripped into the close. In my estimation this was a short-covering induced rally but nevertheless, they rallied! Keep an eye on 1450-1453 to be resistance and for 1400 to be the first level of support.

The BTK (Amex Biotech) traded down to support at 463 before bouncing to close near its highs. In my estimation a trade above 474 (yesterday's highs) should push us back into the 480-485 range. With Intel's news out, the action in the SOX may be extra volatile today. Look at 525 for a resistance point and for 500-505 for the support area. The Banks (BKX) experienced a small pullback yesterday and traded in a tight range through the day. If the BKX can trade back above 950 that may push the entire index higher. Look at yesterday's low, 945, to be the first support level and for 950 to be resistance. I mentioned a few days ago that the OSX (Oil Service) might be ready to breakout of its base. After making a triple bottom in late November, the OSX woke up yesterday and was able to push through its 50-day (86) and close near its 200-day MA (88.38.) The first resistance point is its 200-day MA and then look to 90, which is where it topped out back in October. The DRG (Amex Pharma) is holding the 320 level nicely. Look at 320 to provide support and for 322 to be resistance. The XAU (Philly Gold/Silver) pulled back and closed near the bottom of its short-term range. Look for 108.50-109 to be the first support level and 111.60-112.75 to be the resistance area.

Good Luck.

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positions in various pharmaceutical, gold, semi stocks and SanDisk

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