Tuesday, June 24, 2008

Tuesday Intraday Psychology

The markets have strengthened today, with financials providing the charge for the S&P. The failure of crude oil to break down continues to be the headline, but we feel it will break. The FOMC has an open net chance to strengthen the greenback and bring down the price of oil tomorrow, and we are feeling more and more confident that will be done, so we don't recommend being short. Whether through very tough rhetoric on fighting inflation or a 25 basis point rate hike, the FOMC will take advantage of this policy meeting in order to stop inflation, the number one problem for future growth. We think the FOMC is bold enough to address inflationary pressures over already stagnant growth. Please recall Chairman Bernanke was criticized for being too slow to act previously; perhaps that'll all change Wednesday at 2:15pm ET. The markets and talking heads seem to be caught in the headlights, and with such price erosion occurring lately in the indexes and such pessimism, POTC sees psychology changing on a dime. A major bear market bounce will come as crude breaks through to the $120s. The FOMC is in a closed door meeting at this moment, and they have the sword to strengthen the greenback and slay the crude oil dragon. Our readers should not force any trades until crude oil breaks down. The unwinding of the oil trade will offer 10% plus upside for most Indexes, so please be patient. Thanks for returning. We trust the Psychology of this patient Call will make you money.


Anonymous said...

I enjoy your analyis and am often impressed with your accuracy. But now that you are not recommending being short, and you say the unwinding of the oil trade will offer 10% upside for most indexes, what will happen to all of your GS July puts? The "fourth of July fireworks" are not very far away.

The Call Team said...

Apologies. We didn't reiterate we’re still bearish. A mere bear market rally of 3% is a normal event, and we predict it begins after the Durable Goods orders at 8:30 ET Wednesday. Please refer to more in depth advice in the "Wednesday Market Psychology."
Hold on to GS, as the FOMC did everything in their power to aid the IBs. Remember, the consumers need a break, and the consumer voting block is much larger than all the Wall Streeters times a zillion. Election years are usually very bullish, so we do have a conundrum, but a bear rally of 3% this week will not dampen our bearish outlook. The only thing that would make us turn completely bullish is Euro-ization of the U.S., or crude breaking under $100/barrel before the fire works, and what are the chances of that?

Krishna said...

I also have PUTS on GS... I totally agree with you that there are bearish remnants but the XLF is beaten down and has breaken all support levels, at some point of time it has to rise from the ashes... I am concerned that the XLF's might get a temperory reprieve from the Fed and we might not recover our PUTS amount????