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Dennis Dick & Joel Elconin

Joel’s introduction to trading was in the Standard and Poor’s 500 Index futures pit at the Chicago Mercantile Exchange. Also, during his time at the CME, he was involved in Index Arbitrage as well...

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January Effect On Markets Appears Delayed

By Joel Elconin

For those investors looking to ride the momentum from the end of 2013 into the New Year, you may have to wait a few more days.

So far, from the opening bell on Thursday, there have been more sellers than buyers.

With Friday's weak close (1825.50), the S&P 500 Index futures will be testing a key support level early in Monday's trading. That level is 1820, which is the area of Thursday (1821.75) and Friday (1820.50) lows. Also, it coincides with the December 24 low (1820.50), putting an all important triple bottom in place.

If looking to take a cue from the tech giants Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL), you may want to look somewhere else. Both are on the verge of a technical breakdown.

Google, which has been hovering above the major support at the 1105 level for past two weeks, closed right there, as it cascaded in the finals minutes of trading. If that level and the psychological 1100 level gives way, the issue may not find support until the series of lows at 1060 from mid-December.

See also: Can 2013's Market Laggard Become 2014's Leaders?

Apple, which is preparing to present again at the Consumer Electronics Show this week, sliced through the major support at 550 during Friday's session. Similar to Google, Apple closed just off its low of the day, nearly 10 points under 550 at 540.98.

Apple, which has been buoyed by optimism surrounding the China Mobile (NYSE: CHL) deal, has rejected the rallies that followed the announcements about the partnership. On both occasions, the issue rallied over 570, but failed to continue the move.

Another major component of the index showing weakness is Exxon Mobil (NYSE: XOM). Since making a new all time high on Tuesday at 101.39, the issue has shed nearly two points over the last two trading sessions. If Exxon is unable to hold the minor support at 99, it may not find major support until the December 18 (97.01) low.

If not for the strength in a few financial stocks, namely Bank of America (NYSE: BAC) and JP Morgan (NYSE: JPM), the index would have been deeper in the red.

Both issues moved higher following an upgrade by Citi analyst, Keith Horowitz on Thursday. Horowitz upgraded Bank of America to Buy and slapped a $19 price target on the issue. This enabled Bank of America to breach the major resistance at 16 to end the week at 16.41, its highest level since May of 2010.

Horowitz cites continued value in JP Morgan and raised his price target to 72. JP Morgan finished the week with some upward momentum as well, ending Friday's session at 58.66. JP Morgan is now trading at levels, not seen since April of 2000, when it made its all time high of 62.

Perma-bulls will attribute the decline late in the week to the fact that many of the major funds not being back online yet following the midweek holiday. Therefore, they will back in full force on Monday ready to invest funds left over from month and full year end payroll deposits.

With the market showing its most technical weakness in months, it certainly will be interesting to see if the buying spree will able to stem the decline from last week. If not, true followers of the January Effect, may be not happy with the year-end outcome it may be predicting, as the market is left out in the cold.

Tags: Citigroup Keith Horowitz

Posted in: Movers & Shakers Technicals Intraday Update Movers Trading Ideas General