Breakfast with Brodsky
The overseas markets perked up off our strong rebound late in the day. The Nikkei was up marginally while the Hang Seng tacked on 2.4%. The European markets are currently trading slightly higher as well. Our own futures market looks strong ahead of the highly anticipated FOMC announcement which is due out at 2:15 (eastern time.) In regards to this FOMC meeting, the Fed has said many times that it can and will leave the interest rate at its current level which is at a 45 year low. People are going to be paying close attention to the Fed's bias on if/when they may be raising rates. Will it be in Q1 next year? Q2? That's what people want to know (don't we all!) I wonder what a small hike in rates will affect the most? Will the housing market's hot run come to an end? Will the Refi's get hit off a near term Fed rate hike? Will Gold look less attractive? How will bonds react? If rates go up, prices will come down and where will those funds go? Will they spill into our equities markets?
These are all questions that will certainly be asked in the coming months as we enter into 2004 where odds are we may see some hike in rates.
Although our markets were strong across the board yesterday, one day of gains certainly does not mean we are out of the woodwork yet. Let's dissect the charts of the S&P, Dow and NDX and see if we can get a handle on where they (and we) may go over the next few days. The S&P chart looks fantastic. We were able to rally off the 1060 support area and close at the high of the day. In the last six trading days we have been capped out at 1070. We have either failed there or closed at that level only to fail the following day. Those of you familiar with The Elliott Wave Theory understand that moves usually move in waves of three or five. It appears that we may be headed into a third wave higher in the S&P which if successful may carry us to new year highs.
The Dow broke out of its recent range yesterday to close at new 52-week highs. It certainly looks like the television types will be pumped that they will once again be able to hype up DOW 10,000! On a more technical analysis we can see resistance on a long-term basis (2000 highs to 2002 low) is at 10,011. That level would be a 62% retracement from the all time high to the recent low. In regards to more "recent" chart resistance we can see that in May of 2002 we had trouble at 10,300.
While the tech heavy NDX is a bit further away from a new 52-week high, it does look like it may be ready to run back to the 1450 level. The NDX held 1400 (50-day MA), which also happened to be a 50% retrace from its recent move (Nov 21-current.) A trade above 1418-1421 could push the NDX back into a near term up trend and quite possibly back to 1450.
The Banks (BKX) were on fire yesterday. Not only did they close above the 950 level but were also able to close on their highs. I don't have to say what a big percentage of the S&P 500 this group comprises and that is a healthy sign to see these things rally like that. Resistance for this group lies at 958 and look for support at 946. The OSX (Oil service) and XOI (Amex Oil) were able to once again assume leadership and close on their highs. One other index that appears to be ready to move higher is the DRG (Amex Pharma.) After almost three weeks of consolidating the index has broken out of its near term channel (318-321) and this could push the index back to its recent high (326-329.) The Cyclicals (CYC) were able to forge higher and look poised to make a nice push higher here as well. A break above the 636-640 area could push this index to new 52-week highs. Retailers and semis were a bit heavy yesterday and could not rally with the rest of the market. Although the SOX (Philly Semi) did not rally, it was able to hold support at 492-495. A trade above yesterday's high of 503 could push this index back into an up trend. The XAU (Philly Gold/Silver) was heavy most of the day but staged a late day rally to close at its high. Support is at 109 and resistance is at 111-112.75.
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