Recap 12/18/07

Yesterday’s trading started out on a positive note, after Goldman Sachs (GS) reported a record-setting fourth-quarter and the European Central Bank took drastic steps to help ease liquidity concerns. Europe's Fed offered up $501 billion to banks after presented unlimited 2-week funding at 4.21%, a move meant to fill in end-of-year funding gaps at major investment banks. Meanwhile, in the U.S., the Fed proposed a set of rules to help keep subprime-mortgage history from repeating itself.

After a midday dive to the downside, the Dow Jones Industrial Average (DJIA – 13,232.47) settled for a gain of 0.5%. The DOW’s intraday progress was halted by resistance from its 20-day moving average.

The S&P 500 Index (SPX – 1,454.97) turned in a gain of 9 points by the close, with the 1,460 level providing resistance to the index's rally. The Nasdaq Composite (COMP – 2,596.0) rose 0.8% higher but it could not get up to 2,600 level.

I am still net short but looking to lighten up. We had a good day psychologically as the market could have just rolled over. We need another up day tomorrow to get past the resistance. We also need the FED to cut inter-meeting. They are just sitting around waiting to see if their efforts will psychologically stabilize the credit situation. To this point it has not worked.

Maybe this is wishful thinking but the “Credit Crisis” has hit the front page of the New York Times, this is usually a good contrarian indicator of a top or bottom.

Dow Jones Industrial Average (DJIA – 13,232.47) - support at 12,500; resistance at 14,000

S&P 500 Index (SPX – 1,454.97) - support at 1,400; resistance at 1,510

Nasdaq Composite (COMP – 2,596.0) - support at 2,500; resistance at 2,800