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As the Amaranth story makes its rounds, imagine telephones ringing off the hook at hedge funds asking them how exposed they are to energy (and when a guy who gave you $100M calls, you do pick up the phone).

Now imagine Mr. $100M saying to Mr. Hedge fund manager, “Everything’s fine? Well send me $40M then, I’m going to open an IRA.” Savvy wealthy investors know it’s important to test the liquidity of the institutions that are holding their money from time-to-time, and this may be one of those times. Of course hedge funds have rules to prevent mass exodus’ from forcing them to liquidate, but the cumulative effect of hundreds of investors lightening up “just a bit” can quickly snowball into a real crisis.

CNBC's Dylan Ratigan (6:45am) says 20-30% of the price of crude is speculative. Joe Kernin just insinuated that hedge funds have been manipulating the oil markets. If this is CNBC’s editorial take on the situation, prepare for some real fireworks ahead!

To make it even worse for the hedgies, the British are coming! It has come to the attention of the UK Tax authorities that some funds are not paying their fare share.

Anything other that a down market today, with imploding asset-managers and a big, scary Fed meeting tomorrow, would be a amazing. And as I have been saying since the last PPI, there is no way the PPI will come in where analysts think it will with energy prices dropping like they have.

I wanted a pullback to start yesterday so it we could find a base, but you bulls just keep on buying! Now it's time to pull some of our weakening plays off the table and sit back and get a real assessment of the strength the market (remember -– very tight, 20% of the profit stops, it may be time for cash again!).

What is really dangerous it the willingness of the media to portray this as an isolated incident when there are 8,000 hedge funds holding $1 trillion in assets and the smartest hedge fund manager in the country, Eddie Lampert, quit the game to go into retail a while ago.

Asia had a mild pullback this morning, boosted by mighty Toyota Motor Corp.'s (NYSE:TM) goal to be the only car company on the planet (almost) in 20 years. Europe is heading down as hedge funds are prevalent there as well, although we need to stop saying hedge funds as all funds have been making their money in the same market for years and, if this party is over, it will be very, very over!

Speaking of German invaders, Deutsche Telekom AG (DT) purchase about 1/3 of the US radio-spectrum licenses at the FCC auction yesterday for $4.2B, squeezing new players out of the running.

"The dream of new entrants that would shake up the market died," said Roger Entner, an analyst for technology research firm Ovum. "The usual suspects have won." Does anyone want to guess which party the “usual suspects” made record campaign contributions to?

My buddies at Comcast Corp. (NASDAQ:CMCSA) got their piece, so all is right within the world of global monopoly from an investing standpoint.

We are watching the same levels as yesterday so I’m not going to waste space on that. My real concern will be if the S&P breaks below 1,315; otherwise I will be looking to pick up bargains ahead of the Fed. I’m not sure the VIX has room for a major sell-off, so today’s action will be interesting from that standpoint as well:

http://stockcharts.com/gallery/?$VIX

It’s all about Oracle Corp.'s (NYSE:ORCL) earnings after the close today; good news from them will be great news for the Nasdaq which is essential, as we will need unqualified tech leadership as commodities and the financials who trade in them take a dive.

As I said in my above mentioned rant about hedge funds: "The premise oil and gas bulls are operating under is that for 100 years of being traded as a public company, through 2 World Wars, a Cold War and a depression, every investor, trader and analyst who ever lived undervalued Exxon by 150%. That’s right, the people buying oil stocks now think that, not only are they worth close to 2x more than at any point in history but that here, at the high point, they remain undervalued. "

Play with this chart by adjusting the number of days from the 1,804 (5 years) maximum, to around 13 days and you will see how easily even a mild correction can erase hundreds of billions of dollars of very recent gains.

There’s not telling which way oil will go because even CNBC is starting to notice this market may be acting a little funny, but if they can’t keep it above the $62.50 line for the week, then $60 will be tested very soon.

Don’t forget we have the George Bush vs. Mahmoud Ahmadinejad, Iran’s president. But the shenanigans have already begun as the US is hassling the Iranian diplomatic team. Juvenile? Remember kids, he’s a uniter, not a divider (uniter, by the way, comes up red in my spelling checker!).

Gold will do whatever the dollar doesn’t, but we may be heading back to that situation I’ve been harping on: global demand for good old US dollars exacerbates the fall in commodity pricing, as shiny bits of metal and slimy buckets of oil are quickly traded for greenbacks.

Let’s watch the SOX and the Transports; a SOX breakout over 480 or the transports just holding the descending 50 DMA of 2,450 will be a very strong sign. Without these signals, there is no reason to buy anything today.

We are getting more bad news for the builders today with housing starts down another sequential 6% from July’s already abysmal number. Since we live in bizarro market world, that must mean it is time to make our builder plays -– but let’s wait until we get a firm bottom!

No new picks today, I will have some this afternoon but let's take today's early "rally" as an opportunity to lighten up a little.

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Source: Options Trader: Tuesday Morning Ideas