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Terrific Tuesday? I'm already happy today! Not so much about the market but about BP being investigated for additional manipulation of the oil and gas markets. Just remember — you heard it here first! Last summer everyone said I was a crazy conspiracy theorist! Now watch what happens. Much like the options scandal, this thing can spread, causing investors to question the true value of the commodity! There is a stunning number in this article — $40 Trillion, that's the amount of oil traded every year...

I'm not going to go off on oil again, as it's only Tuesday, but natural gas was trading at $6 in 2004, spiked to $13 (up 115%) between last October and January, and is now back to $6. Crude traded at $30 in 2004, spiked to $75 (up 150%) in May, and is now in its 4th month of a possible peak as well. Check out this last chart (monthly oil prices) and tell me if you would buy a stock that spiked up like this:

It took gas just 5 months to revert to its mean — let's hope oil is half as kind to us!

The Asian markets seem enthusiastic with nice gains across the board today. China's CB will again tighten currency reserve requirements; this has the dual effect of slowing growth and helping the dollar, which is just super nice of them!

Speaking of Asia, there is a rumor that Sony (NYSE:SNE) will be coming out with an 8GB flash player to attack the Nano (hence Apple's (NASDAQ:AAPL) drop yesterday). Forget betting on Apple or Sony. Unless there's been a breakthrough I missed, that means 2 chips per player, which means chip shortage in Q4, which means Sandisk (NASDAQ:SNDK) should be in play — but it just made a 30% move, so let's just keep an eye on this one. But I like Micron (NASDAQ:MU) at $16.55, or even the Jan $20s for $0.45.

Europe is also in good spirits this morning and looks ready to rally (as do we). Bayer came in with an 11% profit increase, and Brent is down another $1.55. Hopefully NYMEX will follow suit when it opens.

The markets will be watching Consumer Confidence at 10 am, which was way up at 106 last month. Later today we will see the Fed minutes. But the big news is tomorrow's GDP report (was 2.5%, should pick up). Thursday brings personal-spending and income, both of which I expect to rise over the summer.

We should see a test of overhead resistance today. Any retracement below yesterday's open would be bad, but anything positive will be nice today. Watch how the Dow handles 11,400 — finishing over this mark for the week can set us up for a huge post-holiday rally. The S&P will have a hard time breaking 1,305, but may pop nicely after that. The Nasdaq may top out at 2,200 on this run; anything above that is uber-bullish. The NYSE is in a pivotal spot, and the markets are just not strong enough to rally if this index can't take 8,400.

Let's keep an eye on the SOX, which must take out 440 and 450 this week to confirm direction, as well as TRANQ — 2,450 was a very hard ceiling 2 weeks ago. If oil stays down and the transports can't break out, then there is no underlying confidence in the markets.

Expect a parade of oil pumpers on every network, plus we have the legitimate disaster-in-waiting as the UN and Iran prepare for an old fashioned shoot-out. Rather than "high noon" or even "Gunfight at the O.K. Corral," I think we will see the UN starring in "The Gang that Couldn't Shoot Straight," as the second thing China and Russia have agreed on in the past 80 years is that they don't agree with the US and Europe on sanctions against Iran.

To their credit, the first thing Russia and China ever agreed-on was that going into Iraq was a mistake, and they were right about that one!

It will be difficult to get oil down below $70 on Thursday's non-event, but we have inventories tomorrow and another surprise build will be a disaster for oil bulls. We already know $72.50 has been firm resistance. Hopefully that ceiling has dropped to $72 now and we can start forming a nice downtrend.

Gold is essentially in the same place as oil, but will be in very clear trouble if they can't recover $624 this week. I imagine most chartists have as rough a time, as I do, shorting against the gold chart, which looks like it's ready to bounce — but I maintain that all of last week's data was a false-reading in response to the oil shenanigans (thanks BP!), and the trend is far worse than the bars are indicating.

So commodities are artificially high and stocks are artificially low. There is still a phenomenal amount of capital sitting on the sidelines as the Fed pause has soured the bond market already. If commodities begin converting to cash, regardless of the price, that cash still needs to find a home.

Speaking of homes, as homes are being converted to cash, that cash also has to find a home. And if that home isn't a new home, then it to must find its way into another investment or we will end up with a flood of capital that drives rates down again... Isn't economics exciting?!?

It's nice to see Adam Smith's Invisible Hand still at work once in a while; makes you feel like it's not all as random as it often seems.

Let's be careful chasing things up ahead of the GDP report. If consumer confidence is high, GDP should be good. But if both crash, the air can come out of the market very quickly. We need a zero-tolerance policy on the S&P falling below 1,300 or the NYSE falling below 8,300!

Yet another reason to love Intel (NASDAQ:INTC), as they unveil a new line of Opteron killers. AMD (NYSE:AMD) is countering that the Tulsa chips use more power, but I've never met a network tech who traded POWER for power. With a huge 16meg of built-in memory, a lot of programmers will be looking at trying at least one of these. This puts the $20s into play at .20; perhaps flip out of the October $20s and ride these for free on the profits...

Hewlett Packard (NYSE:HPQ) begins shipping new Intel Duo chips in 2 weeks — yet another boost for Intel, and yet another reason to take the $35s for .95.

TINY (NASDAQ:TINY) is a nanotech fund which should break out in a good market. My favorite holdings of theirs are Chlorogen, D-Wave, Nanomix (see article) and Nextreme, who just got CIA funding. I like owning the stock outright at $9.56, as this is a long-term play. You can sell the Oct 10s for .40 if you are a conservative investor or buy the March $10s for $1.15 (you can also sell Oct against).

AXA (AXA) $35s are very cheap at $1.40 (virtually no premium), and I think this company has been ignored as an insurance investment. We need to make sure they hold $36, but if we can make it through this week we could be in very good shape.

AnnTaylor Stores (NYSE:ANN) had a huge pullback for no reason, and I love the $40s for .95.

I don't know why they keep giving Harrah's Entertainment (HET) away; I'm just glad when they do. It may still come down to $58, but Jan $65s at $2.20 or less have a lot more pluses than minuses. I will take the Oct $60s under $2 if it comes down.

Source: Options Trader: Tuesday Morning Ideas