Washington Magnets……………..update at 11:15 AM CST

Congress is coming back on Monday and have little red and blue magnets in their pockets.  These magnets will keep them from getting anything done.  Here is what wikepedia says:

Magnets exert forces and torques on each other due to the complex rules of electromagnetism. The forces of attraction field of magnets are due to microscopic currents of electrically charged electrons orbiting nuclei and the intrinsic magnetism of fundamental particles (such as electrons) that make up the material. Both of these are modeled quite well as tiny loops of current called magnetic dipoles that produce their own magnetic field and are affected by external magnetic fields. The most elementary force between magnets, therefore, is the magnetic dipole–dipole interaction. If all of the magnetic dipoles that make up two magnets are known then the net force on both magnets can be determined by summing up all these interaction between the dipoles of the first magnet and that of the second.

It is always more convenient to model the force between two magnets as being due to forces between magnetic poles having magnetic charges ‘smeared’ over them. Such a model fails to account for many important properties of magnetism such as the relationship between angular momentum and magnetic dipoles. Further, magnetic charge does not exist. This model works quite well, though, in predicting the forces between simple magnets where good models of how the ‘magnetic charge’ is distributed is available.

What Washington will be able to accomplish is pull the stock market down.  Based on the S&P we see areas of significance, 1489 and 1419. the top and bottom of the previously outlined trap area and 1398, the low for the year to date.  Between now and Monday’s close there is a good chance the market will be attracted to each of these levels.

As to our positions, we feel better than yesterday.  It now feels good to be short stocks and gold and out of the short T-Bond position.  Now that the dollar has broken out to the upside, we will use available cash to reinstate the long dollar position.

Update on Positions:

We will be selling more gold on a bounce to the 1595 area and buying the long dollar position back on a retracement to the 80.85 area basis the dollar futures contract.  Also the trade that has been pushed by the commodity traders on CNBC,  long gold / short yen topped out on February 6th and now the short yen part of that trade is about to trigger into an upswing if  yen futures close above 107.68.