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Testy Tuesday Morning

Tuesdays have been a real gauntlet for the markets.

They tend to have a lot of data as everyone shakes the sand out of their shoes and gets back to work on Mondays. Today looks like it’s going to be a monster!

Most Asian markets took the day off with generally flat trading other than India who lost 400 points for the second day in a row, totally ruining my “Market of the Year” pick from January after a nice 45% gain! Japanese traders made a strong dollar bet and boosted export comanies with SNE leading the way.

I got a report from Joan in Holland last night who says retail sales in Europe are robust, which does make sense so stop thinking disappointing US retail sales will bother multinationals – we’re just not that big a deal anymore!

Europe is also tentative, waiting for the rash of economic data we will be hitting the world with today so we’ll just move on…

Lets not be greedy today, anything not down will be good but it’s all about the Fed this afternoon so trade at your own risk!

We still have that sleeping giant VIX which may be held down into expiration but I wouldn’t chance it and these indices better be pointing the right direction when it goes off!

Trade deficit is $58.9Bn, much lower than $63Bn expected (as predicted – thank you!). That’s a little bit of dollar fuel as we are “only” losing $700Bn a year at that rate vs. the $800Bn pathe we were on…

We imported less oil (312Mb vs. 317Mb) for less money ($7) than the previous month, accounting for $2.5n of the drop so we “only” sent $17.29Bn out of the country to pay for oil last month.

Stop complaining about high gas prices and be glad you’re not a Turk! Turkey pays the most for gasoline ($6.75 per gallon) with a $5 per gallon gas tax, followed closely by Norway, UK, Germany and France – all around $6 total. Next time you want to gas up, you may want to consider Venezuala, where our man Hugo almost gives it away for .50 a gallon!

Let’s keep an eye on oil around our $61.69 mark but the big drop day last month was the Wednesday of expirations, Tuesday was a pump day and they’ll get to close oil ahead of the Fed so stay tuned for some interesting afternoon plays!

Our new failure line for oil is $60.40 and OPEC is all over the place in their statements but the dumbest one is that they are concerned about the weak dollar so they should cut further and raise prices. Er, boys – that will weaken the dollar, causing you to cut further which will weaken the dolllar further and you can keep cutting until we all have stills to make ethanol if you want to but THE MARKET DOESN’T WANT TO SUPPORT $60 OIL – GET OVER YOURSELVES!!!

The Fed is not going to cut rates in order to maintain America’s ability to send $17Bn a month out of the country to pay for oil. Expect virtually identical language today but with continued concerns about commodity pricing and a specific warning about rising energy prices reignighting inflation concerns.

The simple removal of the word “timing” from the last statement’s “The extent and timing of any additional firming that may be needed to address these risks…” would be just what we need to spin the dollar. The only caveat here is that they may not want to firm up the dollar ahead of the China trip!

Way back on 9/11 I said about the option scandal: “The IRS may take issue with what is looking like, on a wide scale, a $100Bn plus fraud that has been perpetrated on the US public as the companies manipulated books to create long-term capital gains but the benefit should have been realized at the time.”

If oil had real value it would be kept in a safe like gold, don’t you think? One of the reasons gold is so valuable is because a man can possess it and keep great wealth in small places. Not so oil, you must store it on massive tankers and in vast warehouses and pay to have it moved from one place to another (see last night’s article).

We’re still watching that $630 line on gold and failure of $625 will be our first signal that the dollar is on the march but gold trading is over by the time the Fed speaks (oil too) so they may both go for a last harrah today.

The dollar needs to break 84 to be taken seriously and, even there, it’s still just running headlong into the very inverted 50 dma at 85 so Super Banker and Chair Man have their work cut out for them this week.

Well, the WSJ is finally catching up with me, reporting today that the IRS has begun its investigations. Consider this fair warning as I also said that this would be followed by the inevitable shareholder class action suits!

Subprime motgages continue to be a concern and our Fed may have to step in and tighten lending requirements. This is EXACTLY what killed the banking sector in India (down 10% in 2 days)!

[graphic]

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Bill Rempel posted an excellent MOT chart that confirms my view of the stock:

So this 12-month consolidation, looks JUST like the 15-month consolidation that started in Jan ’04. We didn’t take the Jan ’08s on 11/28 because we thought the stock was going up tomorrow! On 11/28 the stock was at $21.70 and yesterday it closed at $21.23 and you would think the market had collapsed from the way people have been screaming about it the past few days.

Today the TXN conference call may damage them more and, if it goes down enough, I will buy more but it’s only down .15 from where I bought it so far. In fact, MOT was one of my year’s biggest winners (500%) when we took the Aug $20s for .45 back on July 19th.

So patience Daniel-san! Not all stocks go straight up and heaven help us all of we enter a choppier market with this day-trading mentality. Good things come to those who wait and the grasshopper that always jumps on the next best thing will eventually get the clap (or something like that, my Japanese is a little rusty).

I will again assign my new readers (and especially you day traders) to watch this short film called “The Man Who Planted Trees” that will teach you more about investing than all 12 of Cramer’s books. Please give it a chance as the markets don’t go up forever and, even if they do, there are better ways to grow a virtual portfolio (and a life) over time!

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If the markets go way up, thinking the Fed will cut, we need to hit shorts on the Qs and the DIA at 2:28 but let’s wait and see how the day plays out!

AXP threw a fire sale yesterday and our Jan $60s dropped to $1.10 (down 15%) for those of you who missed it. BBY says people are buying like crazy, they just aren’t making money on it…

BBY missed! The sales numbers were great but the margins were impacted last quarter but guidance remains in-line so this will be interesting but I could not be happier about selling those calls! This will give us a great opportunity to buy some Mar $52.50s, possibly for $2.50 or less!

GS had a 10% beat but that included $1Bn form just the ICBC deal and those don’t come every year so $203 may seem a little high to rational investors (although I said this at $155 and got spanked so I’m not touching them!).

My first impression of the CC was correct last night: TXN’s guidance was much better than pretty much everyone is spinning it but it may take time to play out. I’m certainly dumping my puts and hoping to make it up with my Jan calls.

Busy day, more to come later!


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