Iran Fires One Across the Bow
Research for Online Investors

by John Dalt

12/16/09

Iran test fired a Senjii 2 missile a few hours ago. It has a range of 1250 miles, enough to reach Israel, and U.S. bases in the gulf.   It is a good thing that Iran is only pursuing a peaceful nuclear program to generate power. Some think the power they are interested in will not benefit their citizens. The Israelis have asserted their right to self-defense. Reuter’s news service has a good article that goes into detail on the military, political and world response to Iran.

I always smile when the toothless tigers puff out their chests, and utter things like, "This is a matter of serious concern to the international community and it does make the case for us moving further on sanctions."  (Gordon Brown, British P.M.)

The Iranians are laughing at the West.  The only threat under sanctions is gasoline.  Iran lacks refining capacity.  I told you two months ago about Iranian President Achoo meeting with Venezuelan Presidentee Hugo Chavez.  Guess what, Chavez has refineries, do you honestly think he is going to cut off petrol to his good buddy, Achoo?  Even if Maobama, fresh off winning the Peace Prize, asks him?  We wrote about Venezuela's agreement to sell gasoline to Iran on Sept. 15 in, "Bebi Goes to Moscow."

I always look at group pictures of Western leaders to see if Foghorn Leghorn is around the corner.  The Western country's leaders have not read their own history.  Neville Chamberlain believed you could trade weakness for peace.  Harry Truman thought he could deal with and trust Stalin, sentencing two generations of innocent people to life behind the Iron Curtain.  That is in the last seventy years.  Time and space constrain the list.

Iran’s government is repressing political descent, jailing protesters from the riots that have taken place since the presidential elections. More than 80 people have been sentenced to prison terms up to 15 years, and five have received death sentences. I bet the Iranians are glad they got rid of that nasty old Shah. Kind of like that “hope and change” deal. Crude oil went up today. We always like to be long crude oil over long holidays; it just lets me sleep better. I consider it a hedge against dictators and stupid people.

The FOMC released a statement this afternoon. The market reacted to it with a slight sell-off even though the statement signaled a continuation of present policies. Interest rates are unchanged and will remain “exceptionally low” for an “extended period.” The Fed believes unemployment is abating, and economic activity is “picking up.”  The Financial Times has the story in detail, “Fed leaves rates unchanged.”

The market acted as expected in our letter to SwingTrader subscribers this morning, “Overnight and futures are up. It looks like we have a positive bias for the open. I think we will probably settle lower today.” I don’t mean to blow my horn, but sometimes you get in a groove, and feel like you have ‘vision’. We have closed six trades in the last week and a-half, with an average 6% gain! Check out our results. You can Join Us.

Here is a chart that may scare you. We still expect higher highs in the market, but know a pullback could be in the future. Today's chart presents the long-term trend of the Russell 2000 (small-cap stocks). As the chart illustrates, from late 2002 into 2007 the Russell 2000 traded within the confines of an upward sloping trend channel. However, since mid-2007, the trend has been down. Fears of an outright collapse of the financial sector resulted in support (green dashed line) of an already steep downtrend to be breached. As it became apparent that the financial sector would survive, stock prices rose with the Russell 2000 moving back into its original downtrend channel. Currently, the Russell 2000 is testing resistance (red dashed line) of its two-year downtrend channel for the second time since the financial crisis.

Hope is not a trading strategy.

With the present Congress still in session, remember:
“The nine most terrifying words in the English language, I’m from the government and I am here to help.”--Ronald Reagan

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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