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Gap and Phil

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Hit it Hard!

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"Tears in his eyes I guess as he lines up this last shot, a Cinderella story, outta nowhere, a former greens keeper, about to become the Master's Champion!"

(Carl Spackler)




Good morning and congrats to Phil Mickelson who finally got a major victory and will be sportin' a nice new green jacket. The market finished the holiday-shortened week without such success as the early tech love affair quickly faded when traders headed for the hills to enjoy the long respite. Positive news from Yahoo! (YHOO:NASD) and Dell (DELL:NASD) gave the market an early bid but as the testimony from Condoleezza Rice progressed and the afternoon wore on - the party quickly faded.

The Nasdaq climbed to resistance at 2075 before closing at 2053. The weakness leaves us staring at support at 2037/2018 (50 day ma). The NDX gapped higher off the open to around 1500 before closing at 1485. We've got support at 1475/1469/1460 (50day ma). We noted the soggy trade in shares of Intel (INTC:NASD) on the Buzz during the tech lift, and that stuck out like a sore thumb. Fleck discussed Intel in last week's Fleck Rap, highlighting the lingering concerns about notebook demand and the clues to had from the Seagate (STX:NYSE) warning. Please take a look as the company reports earnings after the bell on Tuesday and that'll likely color the trade in tech.

The DJIA touched resistance off the open at 10554 and worked lower to close at 10442. Support lies at 10425/10420/10400 while we've got resistance at the 50-day 10455/10470/10500. Taking a closer look at individual components, I would highlight the action in Wal-mart (WMT:NYSE) which fell 2% to close right on its 200-day ma (56.69). The action hit the Retail Holdrs (RTH) [WMT is 22%] which cracked the 50-day ma (92.80). Watch the action in the retail space on the heels of Thursday's same store sales data (generally ok) as that is a sentiment gauge of the all-important consumer.

Exxon Mobil (XOM:NYSE) tried to break thru resistance. Speaking of which, oil was higher on Thursday thru $37 / brl. Alcoa (AA:NYSE) continued its slide after its earnings miss. That, in part, impacted the Cyclicals (CYC) which flinched at the 700 level and are looking at support at 690/686/680.

For its part, the S&P 500 climbed to resistance at 1150 before it ran out of gas. That leaves the index at 1140 with further support at 1135/1125.

It's important to point out that the volume flows were expectedly light with 1.19 bln shares trading on the Big Board and 1.6 bln on the Nasdaq. Taking a further look at the internals, decliners outpaced advancers on both exchanges - 2032 to 1196 on the NYSE and 1674 to 1481 on the Nasdaq. There were 151 new highs 151 to 22 new lows on the NYSE - 187 to 12 on the Nasdaq.

Chart Check

A scan of the charts shows a number of similar patterns with strength on the early gap higher toward a ceiling of resistance and a pullback toward/thru support.

The semi's had the opportunity to take the ball and run with it on Thursday with respect to leadership. While they managed to hang in there - we'll see if they can get some momentum here. Initial support is at 507/500 with resistance overhead at 518/531. The action in the group along with earnings from Intel (INTC:NASD), Novellus (NVLS:NASD), Advanced Micro (AMD:NYSE), Texas Instruments (TXN:NYSE) and Int'l Business (IBM:NYSE) will set the stage for tech.

We noted the lethargic action in the financials on the Buzz on Thursday. The Banks (BKX) finished just a hair under the 50-day ma (100.25) while Citigroup (C:NYSE) traded weak and is hanging onto recent support by a thread here (report earnings on Thursday). Also look for earnings from Merrill (MER:NYSE) and Bank of America (BAC:NYSE) this week.

The Russell 2000 Index (RTY) cracked 600 - at some point we'll see if the large caps take the baton back with respect to leadership. General Electric (GE:NYSE) yawned on its earnings report as it tested resistance at the 50-day ma (31.85) and melted. The biotech's (BTK) got an initial boost from the Genentech (DNA:NYSE) earnings report but then came back in.

As we discussed on Thursday's Buzz, anytime technical levels are violated, it is certainly noteworthy. However, volume (at least in my view) is a critical confirmation of the technical action. In light of the low volume drift, swirling geopolitical issues, Rice testimony, long weekend / religious holiday - many traders simply did not want to carry positions on their sheets and assume the weekend risk. We'll have to wait to see how the action unfolds with all market participants involved. The focus obviously continues to remain on the geopolitical scene and the earnings' picture. We've got a busy week as earnings season shifts into high gear (14% of the S&P 500 reports). There are some big names set to report this week - so stay tuned.

As always, we'll scan the action and highlight the relevant info as it all unfolds. Good luck.

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No positions in stocks mentioned.

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