Monday, January 7, 2008

01.07.08 - Strict & Liberally Drawn Support Levels

A constructive day with a number of potential buyable pullbacks along the way. I was a bit nervous about the market in the early a.m., but I suppose a November lows retest was to be expected as close as we already were, and now Cumulative Tick and A-D lines look pretty positive. Lastly, leaders are showing terrific relative strength. I'm actually surprised the general market is as far behind as it is (XLF +0.95%/ IYT +0.75%/ SMH +1.40%) -- still selling winners/ rotation?

I'm very short-term bullish, but still tend to think that these continued retests of the SPY $140 level give credence to a potential breakdown scenario ahead given the right news flow. Strict and more liberally drawn daily support levels are shown below. Certainly lots of "space" between the two. Note we are sitting right above the more "liberally" drawn level.

Uncertainty factors:

  • Obama v. Clinton
  • Jobs/ Consumer Strength
  • Iran/ Hormuz
  • Possible Fed (In)Actions
  • Downgrades/ Earnings Outlook
  • Upcoming Earnings Season
  • Size of Pending Writedowns

By the end of January, nearly all of these factors will have shown their hand for better or worse.


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