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Wednesday, January 27, 2010

THE SHORT-TERM CIRCLE IS NOW COMPLETE


The past 16 months' trading in shares of Intel are one of the great "the market leads the news, not the other way around" stories we've ever seen. It's a story we constantly updated you on.

Last year, the world's largest producer of semiconductors was a monthly guest in this column. Intel makes the tiny engines that run the world's computers... which makes it a high-tech version of Dr. Copper. Tracking Intel's sales, profits, and share price gives us an "instant read" on the world's economy.

In April, we noted how Intel shares held like a rock around $15 after releasing a horrible earnings report. When a stock holds steady or rises in the face of horrible news, it's a classic sign the bottom is in… and things are destined to get "less bad." Intel moved exactly as we scripted and shot up 33%… and the economy got "less bad."

We've come full circle now. Eleven days ago, Intel reported a huge 28% increase in sales and beat analysts' expectations. So what did shares do with this great news? They fell!

The moral of this 16-month story: You'll never make money buying on bullish news or selling on bearish news. "Easy" trades like that never work. This is one of the hardest lessons for a new trader to learn. We think this short-term story of Intel is a great teacher.

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