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Breakfast with Brodsky


Good morning. As we head into this week which is filled with economic data, we will have our first test to really see if this correction is over. Although the market did give back some of its gains late in the day on Friday, we were still able to hold on to much of the ground gained the day before.

We are a few weeks away from another earnings period and this may be the catalyst needed to spark the market again. The last few weeks have been a news vacuum with regards to major corporate news and lately the moves have been driven by geo-political news and terrorism concerns. This week will be peppered with economic data points, which will surely test the market, and looking at the downward action of this month, one could gather that the risk/reward is to the long side.

Even if we do get mediocre data, the market may have already priced this in during its recent downdraft. Good news could certainly bring in institutional demand which has been hesitant to jump in due to the choppiness of the market. Between the coming economic data points and earnings season the market will certainly get its fair share of potentially market moving news.

Technically, the S&P, Dow, and NDX do look like they have put in a short-term bottom as we spoke about last week. Looking at the S&P there is certainly some resistance at 1125 but with people feeling a bit more comfortable in the marketplace, if in fact we do drift lower into the 1090-ish range, we could see demand hold on a retest of that level.

The chart of the NDX looks like it has completed its five-wave pullback which began in January. The first bounce that carried us into the 1430 range could be looked at as an A wave correction where the next move could be a trade back into the 1385 range to retest the bottom before turning back higher.

Again, with so much economic data due out in the coming days the playing field could once again change dramatically. As the week unfolds, we will be sure to examine which news was bought and sold, important technical levels, and where the risk/reward looks the most attractive. One thing that does concern me is the fact that four trading days ago people were ready to sell their entire portfolio (which is somewhat of a bottoming sign) and now they feel more comfortable buying. Recently, the market has not been rewarding the "comfortable" trade and that is something to keep in mind this week. Good Luck.

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No positions in stocks mentioned.

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