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Wednesday Morning

Today will be a big test but, as I said yesterday, I am feeling fairly bearish and will not be committing again until we see a day finishing back above my benchmarks.

I am still long-term bullish but the Nikkei picked up 1.5% today and Europe looks strong and there is only so much money in the world so I just don’t see it coming over here in any kind of volume until we give investors a good reason to put money into US equities.

Whole Foods surprised me with an S&P inclusion so we will have to see how that shakes out. The split can be a great positive as it doubles the amount of puts I hold but the S&P movement may hurt their value. I am considering buying protective Jan calls (maybe $80s) but I will wait until I see what today’s action will bring. Split or no split, who pays 80 times earnings for a supermarket.

The 10 year continues to drop which may be good for the builders but I am still leary of that space.

Today will be all about consumer confidence which should be markedly higher and will be a real disappointment if it isn’t.

Business confidence is very high but I think that the Delta and UPS strike talks are an early indicator of a large scale worker uprising in which the employees will start to expect (gasp) a share of the increasing earnings.

Oil will continue strong into inventories now that it has held $58 yesterday. Oil traders don’t care whether you hold a line artificially or based on value, as long as you hold a line! Today will be a good day to day trade SUN, COP and other oil companies for an early bounce back but you need to be happy to take 1% and get out. Tomorrow is inventory day and that will tell the real tale.

Gold continues to fly, up another $5 this morning but it will have to break and hold $520 to get people excited about gold stocks again as too many people were burned in the last run-up.

I am still of the mindset that the Nasdaq must lead the markets higher and Microsoft must turn in order for the index to succeed.

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A lot of biotech has been hurt by the Korean cloning scandal but I think this will wash over and most companies will recover. Companies that work with stem cells will be hit the hardest.

CELG should open up sharply on FDA approval of Revlimid but they are never going to hit 2005 target numbers and will be a great short coming into earnings. They are splitting on 2/24, which I find odd for a $60 stock. At 124 times earnings, even if the company does double next year it will still be a little pricey.

EK is being given away at $23. This is an old TOTD winner that has sold off into a rising 50 dma and is well below the 200 dma of $25.50. I like the April $20s for $4.30 (a $1.40 premium) looking to get out at $5 with a stop out if the stock trades below $22.50 as that means it has broken down.

BBY is also looking cheap at 20 times earnings but the environment is very hostile.

On the whole I expect today to be a continuation of yesterday so we stay in cash until the market shows us something. It is possible that stunning consumer confidence numbers could inspire a mini rally but, with an inverted yield curve, we can expect everyone to trade very cautiously.


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