Saturday, April 19, 2008

Psychology in the Upcoming Week's Economic & Earnings Data

Hello to all of our loyal readers in every one of 62 countries and counting! Last week brought us many reasons to hear, see, feel, and witness a shift in stock and bond market psychology/sentiment. "Trend Setting Tuesday" of last week did in fact foretell the bullish days that followed, but especially Thursday and Friday. Congratulations to those who took advantage of that little known but often powerful forward-looking market mechanic nugget.

On Thursday, April 24th we look forward to Durable Goods Orders at 8:30 ET, Initial Claims for Unemployment at 8:30 ET, and New Home Sales at 10:30 ET.

The Durable Goods orders will be the most market moving data of the three, and since the estimates have been ratcheted down of late, we believe the potential AAPL sell off could be erased by this data. We would be buying selected technology that may get caught in the AAPL down draft, specifically RIMM.

After market close earnings and CCs come from Microsoft Corp. (MSFT) and Amgen Inc. (AMGN). Since MSFT is in a battle for YHOO, we look forward to the CC more than the generally accepted accounting principles (GAAP) numbers. The Question and Answer session on the CC will be focused on MSFT's psychology in their $44.6B, $31/share YHOO offer. Amgen's CC will highlight their time lines in the current Phase III studies and remind investors of the FDA police, a heavy regulatory burden evidenced by the DNA CC we analyzed.

On Friday, April 25th there will be NO market moving earnings releases. The only piece of economic data is the Michigan Consumer Sentiment Survey at 10 ET.

With consumer sentiment being at the lowest level since 1992, we wouldn't count on much change due to the crude reality of prices at the pump and depressed real estate. We want our readers to understand though, bad economic data releases force the Federal Reserve and Ben Bernanke to stay on the gas peddle and continue to lower rates. Although the Fed is in a very difficult situation with the weak dollar and rising energy prices, our team believes they will continue to lower interest rates to fend off a prolonged recession. Note: this is an election year, and the sitting Elephant administration does not want to see any Donkeys move in to 1600 Pennsylvania Avenue.

We hope you learned something new. We hope you make smarter trades and eventually profit from our forward-looking psychological financial fusion. Please exercise your first amendment rights by printing, copying, pasting, emailing, and faxing our blog spot. Words cannot express our appreciation and gratitude to have you back, reading and enjoying the Psychology of the Call.


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Joseph said...

I've been following your blog since your insight on the SNDA earnigs and CC. I appreciate your comments and most of the time were in the same camp. With that being said do you think were due for a pullback? Most of the macro conditions that existed 3 weeks ago are still in place...earnigs seem to be the driver right now, and they were so downwardly revised it seems to almost insure a "beat the street" number.

The Call Team said...

Hello Joseph, pullbacks will always occur and that's why we give the 11 Commandments top billing every Friday before the market even closes. We agree with your assessment on the earnings driver, but disagree that since macro conditions are same as 3 weeks ago, the market won't climb. Macro conditions are mainly driven by psychology leading to expansion of money/loans. We feel psychology has shifted after the Fed cut so aggressively and staved off greater panic. The equity risk premium is currently too low to remain pessimistic; we reiterate the strength in the Euro as a potential "fire starter" once the leaves turn color and Fall. Thank you for your insights.