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Morning Matters:

Mid Week Update Pushed To Friday
by Geoff Garbacz

p class="article">This is the mid week review. There has been recent weakness. As these issues evolve each week, then audibles may need to be called with either additions or deletions to our portfolio. Cash is at 25% as we sold three stocks recently.

1.Continue to watch the impact of bankruptcies and mergers on the market. Acquisitions are happening every week and there have been no bankruptcies of note in 2010.Updated.

2.Unemployment numbers are due each Thursday and continue to slow bit by bit. Monthly numbers are not due again until February.

3.Data shows that the economy is starting to bottom albeit at a moderate pace. Consumer confidence has not rebounded and must be watched. Numbers reported this week that were positive included leading indicators. Updated.

4.Energy prices are range bound which a plus for stocks as taking less money out of the consumers pocket. Energy struggling a bit here as of late as the dollar has been in rally mode this week. Updated.

5.The Dow Jones is now below 10500. Can 10500 become support? The S&P 500 is above 1100 while the NASDAQ Composite is above 2200 and pushing for 2300 to become support. 2300 has been a struggle. Updated.

6. The big question in 2009 was, "Can the S&P 500 take out its January high of 943.85?" Then we asked can the 38% retracement from the October 2007 high to the March 2009 low, 1014.14 be take out. Currently, this level has been successfully conquered. The next level recently taken out was 1121.44 which is the 50% retracement but it failed yesterday and is a concern. Updated.

7.Erlanger's EBB removed below 0 yesterday. Weekly and monthly EBBs are positive. For daily readings we suggest you go to www.erlangerchartroom.com for hourly updates. Updated.

8. December was another positive month for the S&P 500 and the Dow Jones Industrial Average. The only month that the market has struggled since March has been October. January is now a loser for the month with yesterday's action. Updated.

9.Semis and the SMH broke above $27 but has been unable to hold above $28. As semis go, so goes the market. We need to see a breakout above $28 and have $27 hold as support. Updated.

10. Also as transports go, so goes the market according to Dow Theory. Transports remain strong. IYT is holding above $70. This is a plus for stocks however $75 failed as support. Updated.

11.We are adding a new measure. How small cap names are doing against large cap. Small cap names had broken out since mid October but recently have given a sell signal. Do not add to small cap names until the coast is clear.

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