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May 8, 2006


Pause... the most highly anticipated, five-letter word on Wall Street this week. Will the Fed use it in their press release this Wednesday? Markets were rather subdued today as traders lined up their bets around such expectations. In my opinion, the only pause we are likely to see this week is in market action as we await the Fed's semantics. While the FOMC will knowingly and willingly destroy the dollar in the long run, they cannot be pleased with its recent rate of decline, and I suspect they will fail to throw the markets a bone.

I also have the humble realization that I could be very wrong about this opinion. Therefore, I have not made any significant bets one way or the other and, in fact, lightened up on my shorts late last week. The current scenario calls for playing things safe and reacting after more information is available. Any other action would be a pure gamble.

As mentioned, today's action was rather unimpressive. Stocks hung around break-even for the entire trading day, and the only significant movers on my screen were Centex and Intel. Centex was cut to "neutral" by J.P. Morgan. This downgrade weighed on the homeys in general, and the group saw about a 1.5% loss. Intel popped about 3% on rumors that it may sell its flash memory unit. While the move is smart, it is a little late. The market for flash components peaked over a year ago, and it is doubtful Intel will get as good a premium as AMD saw for its Spansion IPO. In fact, Intel's management probably got the idea from AMD and are moving forward with it simply out of a thirst for cash.

Silver was down about 40c in the morning, but once again overcame its deficit. The white metals seems to have very strong resistance to going down at the moment, and if the Fed does indeed indoctrinate the word "pause" into its current language, I think we could see silver go wild... perhaps busting its high around $14.90 within days, if not hours. Gold fell a negligible $4. Miners were down about a percent, and the time to begin dabbling with Pan American Silver again may be getting close. It's just one of those situations in which I'll know the time when I see it.

Disclosure: Short INTC; Long INTC Puts


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