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Bolling: Iran Talks Can Help

Eric Bolling

I have been closely watching the Undersecretary of State William Burns and the results of his historic meeting yesterday in Geneva with the Saeed Jalili, Iran's top nuclear negotiator.

Don't get me wrong. It is definitely a step in the right direction to send a U.S. diplomat to the bargaining table with Iran. The purpose was to negotiate with the Iranians regarding their uranium enrichment program.

I think the meeting was largely symbolic, however. The U.S. sent Burns, Condoleeza Rice's undersecretary, to the meeting for a single day. And he was sent with demands that Iran has already rejected from much more influential diplomats.

However, I am very happy we sent him. I think the message Burns carried to Geneva was actually a message being sent to a place near Iran, but not on the Persian Gulf. I believe it was a message sent to Tehran, but meant for Jerusalem.

By breaking a decades-old diplomatic embargo with Iran, we showed the world, especially Israel, that we hope to resolve this issue with words and negotiation rather than long-range ballistics.

Don't get me wrong. If there were a conflict (or war) between Israel and Iran, we would and should assist our most trusted Middle East ally Israel. We have no reason to help Iran, a state we believe to be supporting terrorist activity with the revenue it receives from an inflated oil price. Because we use 25% of the world's oil, and the oil market cares little about who actually buys from whom, the origins of that high price can be traced directly to us.

Although the meeting produced few break-throughs, I am not surprised and not concerned. I think the mission was accomplished the minute our man landed in Geneva with Jalili. The message was sent to the intended recipient.

The oil market, however, did not get that same message, as oil is trading higher Monday morning. That likely means that some traders believed the meeting failed.

I think they are misreading the meeting, its purpose and its consequences. For me, it temporarily relieves a big concern -- whether or not Israel will strike nuclear enrichment facilities in Iran.

If oil trades higher this week on the news that the Geneva meeting was a failure, I will look to re-establish a position that was very profitable for me recently. I recently bought the Ultra Short Oil & Gas ETF(DUG Quote). It represents a double short on the broad energy sector.

If the energy sector weakens again, DUG price rises. DUG settled at $34.25 Friday. I am hoping it trades down to $34 this week. I will be re-initiating DUG at or below $34.25. I will use $31.95 on a settlement basis as my stop-loss.

For those who have followed my current Goldman Sachs (GS Quote) and Financial Select Sector SPDR(XLF Quote) trade, I will look to continue to add to my profitable Goldman trade and sell out the XLF for a winner if the financials hold current values.

If it weakens, the XLF position will be liquidated, but I will continue to nibble at Goldman by adding a small amount on a dip below $165. As you may recall, I have been building a Goldman position recently from a high price of $180, down into the low $155-$158 levels. If it settles under $150, the whole position liquidates on a stop-loss, but I will hold the position on a rally toward $200, my objective.

Trade with your head, not over it.