Monday's Olympic Reality

It is apparent to us at POTC that the fear has come back, as evidenced by 10 yr note closing at 3.81%. The Chinese Shanghai Composite Index is the wild card now as their market searches for a bottom. We have been warning our readers about the bursting of the Shanghai bubble for many months: http://psychologyofthecall.blogspot.com/2008/03/munch-fear-screaming-out-loud-in-equity.html The 1-year chart below illustrates the trouble that the Shanghai index is in, as we predicted. Investors/traders in the Chinese market are unable to sell stocks short. Accordingly the fall in the Shanghai Index will affect many world markets before it's all said and done. Ironically, the end of the Beijing Olympic Games will signal the beginning of a tighter monetary policy from the Chinese Central Bank, with increasing interest rates. Who knows where the Shanghai will end up when all is sold and done? This may seem like an extreme view, but if you will permit us to remind you... we called the top of crude oil at $147 and warned our readers that the firing of the starter pistol at the beginning of this summer’s Olympics would be simultaneous with the bursting of the crude oil bubble: http://psychologyofthecall.blogspot.com/2008/04/we-offer-you-most-market-moving.html Oil retreated from $147-8, and since 8-8-08 has dropped a further $7. We expect the S&P to ht 1,250 this week and ask that you exhibit caution with your trades, especially those that are long. We will be back in full force Tuesday and look forward to receiving your feedback on the blog or through e-mail as we continue to elucidate the psychology that drives much of the market movement that we see every week. The Psychology of the Call team