Thursday, July 31, 2008

Thursday Intraday Update

Not a good day for many reasons, but not all is bad either, so a muted hello to all.
This morning's data was mixed, but Wall Street hates uncertainty, so the S&P and Dow are lower. Weekly employment was horrific, and GDP came in acceptable. The question now is whether the consumer will tire once the stimulus checks are cashed. Since this is an election year, we believe there is definitely another stimulus package being written, especially after Paulson and Bernanke saw this morning's jobs data.
We remind you that last week's 280 point Dow fall after the weekly unemployment number of 406K, and today's was worse at 448K, an increase of over 40K in one week!! This marks a 5 year high. So shouldn't the Dow be down at least 280 points since the numbers were worse? Well, no, since the market trades based on forward sentiment. We believe 70% of these employment woes are directly caused by high oil, and the rest by a stagnant real estate/credit market. Therefore, oil is the thorn that cannot be pushed any deeper, or the doctor "risks losing even the patient-investor". The reasons to stay positive are outlined in our "Four NEW Scenarios for Optimism" piece. The fact the Nasdaq is trading a little higher shows the dislocation we like to see when markets are close to being washed out.
Don't underestimate the power in the biotechnology sector, as evidenced by the buy out of DNA by Roche, and today's Bristol-Myers offer for Imclone (IMCL). Our readers should focus on what is working, and since both Obama and McCain are in favor of stem cell research, this opens the barn door for massive capital inflows into novel drug pipelines. Do you believe what Watson and Crick sowed at the University of Chicago over 50 years ago is finally being reaped? We sure think so. You should be excited about the biotechnology sector for the next 5 years, as the pipelines of these companies will only grow fatter with stem cell legislation.
We look to tomorrow's employment report with a more favorable view than days ago, as Wall Street seems to have accepted the ugliness of unemployment rising to 6% by year end. Please remember that our European friends double that unemployment number on average, yet their stock indexes are holding up quite nicely.
A great Thursday to all, congratulations to Garmin shorts, we look forward to making two new recommendations on Monday.
The Psychology of the Call team leaves you with this video/music relief: don't let this market action "change your world today":

Thursday Update

Thursday, July 31st brings Gross Domestic Product (GDP) for Q2 at 8:30 ET.
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/gdp.htm
We have GDP "failing to signal recession" in the positive column in the "POSITIVES vs negatives" piece, and that doesn't look to change. We feel this report will reinforce sentiment, and perhaps even put a floor in below many large financials, especially BAC and JPM! Although the market will be nervous before Friday's Unemployment hammer drops, we believe bulls will be dancing in the streets after this GDP report. Are you positioned long in anticipation of market open Thursday?

Initial Claims for Unemployment for week ending 7/20 at 8:30 ET.
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/claims.htm
Last week's 406K report derailed the bear rally, so this report is probably already discounted with the 280+ point Dow drop last Thursday. This is the type of trading psychology we hope you accept and take advantage of. Please understand that markets churn on the way up, and on the way down. Imagine the washing machine affect. Your clothes are still dirty in the first cycle, yet you know they will soon be clean. So making money being a perma-bear or perma-bull is painful, as markets have never gone down or up indefinitely. If you're that dirty shirt going through the first cycle, there's obviously little chance of optimistic thoughts. POTC prefers our readers become heavy duty type thinkers, not simply brain washed into a buy and forever hold or always be short strategy, as market mechanics are deep and dynamic.

Before market earnings: Automatic Data Processing Inc. (ADP), estimate $.42, Mastercard Inc. (MA), estimate $2.02, and Tesoro Corp. (TSO), estimate $.38 After market earnings: Monster Worldwide Inc. (MNST), estimate for $.35. We believe MNST is oversold.

Friday, August 1st brings the Unemployment Report for July at 8:30 ET.
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/employ.htm
This data is in our negative column in "POSITIVES vs negatives", and we do not look for that to change. Although we believe a number north of 5.6% will derail the rally, we also feel institutions have accepted the sad fact unemployment is rising and could peak at 6% by year end. Quick Psychological Financial Fusion: POTC outlined in the "Four NEW Scenarios for Optimism" the potential ramifications of an infrastructure stimulus plan. Be wary of the possibility. We would be buying IF the market is sold off following this data.
Please do not forget we are in an election year, so politicians must legislate and pass economic friendly bills, even if they are not along their party lines. Partisanship with rising unemployment is a cocktail for suicide. Is your candidate doing anything besides making public appearances? Which candidate would the United States feel most secure with and which candidate would initiate a dynamic/multi-pronged energy strategy that would incorporate drilling for oil, coal technologies, nuclear, wind and solar? Please understand that politics behind money & banking are critical to the health of the free market system. All the stock and bond markets in Europe are but a small fraction of the United States' markets, so although we must respect all partners, should our focus not be on the United States first? You decide when casting that vote in the November rain.

Before market earnings: Chevron Corp. (CVX), estimate $3.01

The Psychology of the Call team wishes all our readers exhibit greater patience in their trading/investing behavior, as we are certain the market will be around next week and next month. We urge you to not force trades, as we've learned from that disastrous recipe before.

Wednesday, July 30, 2008

Wednesday Update

Good Wednesday morning to all U.S. readers, good afternoon and good evening to all others, wherever you may be !

Wednesday, July 30th brought Crude Oil inventories for week ending 7/26 at 10:35 ET. A bigger draw in oil inventories has bumped prices up, but only slightly so far. POTC's bear market rally thesis hinges upon crude staying below $128/barrel this entire week. And if we see that break of $120/barrel this week, "not for more than a blink"(Joe Terranova), than the inflationary plays like coal, solar, and agriculture will unwind. Do we believe this scenario will unfold this week? Probably not, as Iran is making negative headlines again with 6,000 supposed centrifuges: http://www.tehrantimes.com/index_View.asp?code=165793

After market earnings from: Akamai Technologies Inc. (AKAM), estimate $.32, First Solar Inc. (FSLR), estimate $.58, and Visa Inc. (V), estimate $.48. We prefer AKAM over all on the long side.

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Sunday, July 27, 2008

Positives vs Negatives, July 27th Update

The positives:
1) Oil breaks down over $23/barrel in two weeks.
http://www.wtrg.com/daily/crudeoilprice.html
Joe Terranova stated to Dylan Ratigan on CNBC Friday at 3:37 ET: "IF oil breaks $120/barrel, it will only do so for a blink". Do you agree? We called him out in our weekend "Psychology in the Upcoming Week's Economic & Earnings Data", and we will continue to do so to any talking head for your benefit.
2) Election year: Government officials have stepped up efforts to try and fill the "foundational crack" in banking. This is real:
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080726&id=8923334
POTC feels the bottom in bank stocks on a risk reward is much closer than after Abu Dabi's investment in Citigroup (C) in November of 2007 (was it really that long ago?) http://www.citigroup.com/citigroup/press/2007/071126j.htm
Please consider BAC and JPM for your retirement portfolio. We’re confident these two stocks will triple by 2011: cheers to a comfortable retirement!
3) GDP fails to signal recession. GDP for Q2 this Thursday at 8:30 ET. It will be a very bullish day, all things being equal, i.e. stable or falling oil, no geo-political events, no terror events, no gulf hurricanes.
4) The bond market sell off continues, albeit slower than in the past two weeks. Please monitor this smart money next week (we definitely will if you don't have time!):
http://finance.yahoo.com/q/ta?t=5d&s=%5ETNX&l=on&z=l&q=l&c=&c=%5EGSPC
5) Weak U.S. Dollar is finally being touted on the cable networks. Have you noticed the buzz of late? We hope you noticed and remember that POTC was 3 months ahead of the herd on this: (See our previous mentions of the coming Euro-ization of America).
http://news.moneycentral.msn.com/ticker/article.aspx?symbol=US:BUD&feed=ACBJ&date=20080718&id=8912496
6) Extreme pessimism in the Michigan Consumer sentiment may have bottomed with oil breaking down over $23/barrel in two weeks. (Our theory of this being a contrarian indicator proved correct last week, agree?) Last Friday's number came in a little better than expected, and the market, in rare fashion, did not falter, on a Friday following a 280+ Dow fall and ahead of an always uncertain geo-political weekend; a very comforting development for longs.
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/mich.htm

The negatives:
1) Rising Unemployment continues to plague longs; (Thursday's 406K derailed the market, and we were not amazed, as some new money got scared. We took advantage and bought the pullback. August 1st is the first Friday of the month, the day that wields the greatest hammer to the market, up or down. We do not anticipate the negative sentiment of rising unemployment changing. But, we are prepared to buy the pullback, as the "Four NEW Scenarios for Optimism" outline. Is it possible that Thursday's 280+ Dow drop discounted this upcoming data? Well yes, but most likely we will get a down day ahead of an August weekend. The only way the market would rise come Friday would be for oil trading under $120/barrel, and with Iranian tensions on the front nuclear burner, the chances are slim. But we feel the risks are greater for oil bulls like Joe Terranova, as the reasons for oil going higher are obvious, long live the contrarians!
2) Geo-political event risks now weigh as oil finally breaks down. Saturday morning brought more bad psychology regarding Iran's nuclear program:
http://www.tehrantimes.com/index_View.asp?code=165793
Troubling… Now the $64,000 question is whether Israel will take military action. What do you think? Please answer our poll question regarding this topic. We appreciate all feedback in whatever form.

Although the positives are the same as last week, 6-2, up one from 5-3 two weeks ago, and negative readings of 4-6 and 3-7 in the weeks prior, they are different nonetheless in terms of their psychology.

Our targets of 1,190 and 2,150 on the S&P and NASDAQ have been removed. The recent government actions should more than stabilize investor psychology around financials and financials are the back bone of the S&P. The government actions offer fundamental reasons for a sustainable floor/bottom. Please refer to the "Four NEW Scenarios for Optimism", as it offers forward-looking scenarios why the U.S. stock market will rise.

Our conviction in the bear rally continues to evolve, although Friday's often bloody Unemployment hammer lies in our paths. Perhaps Thursday's GDP rally will offer a great swing/exit point, and Friday's pullback will present another buy in opportunity...

We hope you enjoyed these insights. Please do not forget to vote in our Israel/Iran poll. May good fortune be with you throughout the week, and we remind you that without family, friends, and good health, nothing else matters. Please rest assured the Psychology of the Call team is busy 24/7 building out The Investment Island Where Independent Thinkers Evolve. Sincere thanks for sharing the Island ~

Enjoy Monday and the entire week: http://www.youtube.com/watch?v=8paEm4lec5U

Psychology in the Upcoming Week's Earnings & Economic Data

We hope this information reaches you in good health & good spirits! The Psychology of the Call (POTC) team believes the pendulum of crude oil has swung, and the pressure of lower prices is squarely on the shoulders of the "late to the party" longs.

Quick Psychological Financial Fusion: IF you were trading crude oil today, which side of the trade would make you feel more comfortable?


Knowing the FOMC could raise rates sooner than later to strengthen the greenback is another factor to consider. We feel the stress of the oil trade is more painful on the long side as oil breaks through $120/barrel. Anyone still upset with short sellers shoul dreconsider. We cheer the fact there are two sides to this market, and the recent witch hunt against speculators must stop, after all, is it not the long term institutions that bid up oil? The trade blotters today speak volumes, and they reveal a massive banking exodus out of crude, and not the speculators many governement officials were hunting for.
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Friday, July 25, 2008

The Fourth Bell Is Set To Toll

Good Morning and Afternoon,

After today's positive economic data, Durable Goods Orders and Michigan Consumer Sentiment, we are inching toward scenario #4 in "Four Whom the Bell Tolls." Scenario #4 is the most bullish for equities, and allows Bernanke's FOMC to begin raising rates.

Is that why crude oil is currently trading lower ahead of the weekend?

Crude oil rarely falls before the uncertainties of a weekend, so the pendulum of yesterday's negative trade has been more than neutralized in our opinion.

Here is "Four Whom the Bell Tolls"(Four Scenarios):


A safe & healthy weekend to all, please visit the Island Saturday night, as we will have an in depth "Psychology in the Upcoming Week's Earnings and Economic Data." The Psychology of the Call team leaves you with the 11 Commandments:

The Eleven Commandments of Trading

1. Never trade more than 10% of your total capital/account value in any one position.
2. Cash is King, and we recommend keeping 20% liquid to take advantage of dislocations and volatility.
3. Cut losses to 15% maximum whenever possible. If your psyche is shaken, step away and don't trade for 1 week.
4. Take and enjoy profits of 30% or more.
5. Never fall in love with a stock and never force trades or over trade; remember commandment #2.
6. Never accept excuses from management, period.
7. Use technical and fundamental data & psychology/sentiment from the conference call to select trades.
8. There are two sides to the market, long & short; take advantage of that leverage.
9. Understand the significance of the macro geo-political economic environment.
10. Unforeseen events/shocks will happen, inverting the market upside down (remember commandments #1 & #2)
11. All of the above are void without reading the Psychology of the Call.

Four NEW reasons for optimism

"An optimistic hello to all!

As promised, we have provided here the reasons why the bear market rally will not fizzle. The pundits would have you believe the bear rally is over, but we differ for a number of old, and now these four, NEW reasons:

1) Financial concerns like Freddie and Fannie (FRE & FNM) have a guarantee of the Treasury behind them now, so every pull back will see major institutional money inflows as the rules for short sellers in this arena are being rewritten. Four NEW reasons for optimism...
"

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Thursday, July 24, 2008

Thursday Intraday Market Psychology

"Good Morning/Afternoon/Evening,

This morning’s initial claims for unemployment came in at 406K, temporarily spooking the market, as estimates were for around 372K. Please keep in mind this is only a weekly number, and that it always gets revised.

There are many who missed the run up last week, especially in financials, and we see more frustration than anything else. POTC recommends our readers stay long, and do not get swung into the talking heads negativity, as most of them have...
"
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Wednesday, July 23, 2008

Wednesday Intraday Update

The 10 year note continues to be sold, and that bodes well for stocks, here's a look at how aggressively the sell off has occurred over the last 5 days:


We will continue to monitor the "POSITIVES vs the negatives", and we expect you to alert us or provide feedback when/if you feel any of the factors have changed.

As oil continues its’ decent, that massive liquidity must ... "

Wednesday's Psych-oil-ogy

"At 10:35 ET Wednesday, crude oil inventories will be reported, and we stand by our weekend prediction that oil will break $125/barrel. Here's the chart:

Dolly's miss should amplify the move down, as no infrastructure will be disturbed."

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Tuesday, July 22, 2008

Monday's Late Institutional Money & Deja Vu

Our readers should follow the 10 year note as a barometer of large institutional appetite for risk reward. Notice how the yield fell (bonds were bought) after 1 pm ET? That should have alerted us to the poor earnings from AXP and below average guidance from AAPL; shame on us. Were you following the "smart money"?


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Monday, July 21, 2008

Update on the Euro-ization of America

We have been talking for three months now about how the decline in the dollar was likely to foster the Euro-ization of America, with large European entities sweeping in to snatch up US companies at a bargain price.

Only a few days ago Belgium's InBev bought out Anheuser Busch (BUD). News released today reports that Swiss giant Roche has offered $44.7 billion in cash for Genentech (DNA). Do you believe the Euro-ization theory is taking shape?

Here’s what we had to say on 30 April, 2008:

POTC believes the strength in foreign currencies, especially the Euro-dollar will act as a fire starter for high end real estate, particularly coastal and prime urban cities like Manhattan and Chicago, along with blue chip stocks like Goldman Sachs (GS), Genentech (DNA), and Intel (INTC). POTC envisions these buy out/scenarios unfolding by the time the leaves turn color and Fall. Euro-dollar buy outs are on the horizon, so fasten your belt, especially if you're selling short the wrong stocks.”

(http://psychologyofthecall.blogspot.com/2008/04/good-bad-ugly-of-feds-wednesday.html)

Hopefully you’ll also recall the number of times that we suggested to our readers over the past three months and the last few weeks that DNA was a buy. Congratulations to those who bought then (around $70).
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Saturday, July 19, 2008

Half Full Psychology in the Week Ahead

"Psychology of the Call, The Investment Island Where Forward Thinkers Evolve is now read in more countries than ever before. We are grateful for the support of our readers in spreading the blog to every corner of the world: long live the internet. The monotony of talking heads must be broken, as making money only involves forward-looking dynamics, and not one of those dynamics involves panicking to the hour-by-hour noise over cable networks. Interpreting data must be applied on a forward-looking basis, and most talking heads dwell shamefully in the past with little comprehension of market mechanics. We hope to give you a bona fide trading/investing advantage.

IF you missed the slow developing bear market rally, don't worry; for those who profited, congratulations! Please read on... "
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Thursday, July 17, 2008

Sepracor Inc.

We have a very strong buy conviction on Separcor Inc (SEPR), currently trading at $20.67. Our profit target by year end, after two medical conferences, one in August (Germany), another in December (U.S.) is $30, with a failure level of $17.00. You should do your own research before investing in any equity.

From the Sepracor website:

"Sepracor Inc. is a research-based pharmaceutical company dedicated to treating and preventing human disease by discovering, developing, and commercializing innovative pharmaceutical products that are directed toward serving unmet medical needs. Our drug development program has yielded a portfolio of pharmaceutical products and candidates with a focus on the treatment of respiratory and central nervous system (CNS) disorders. Our commercialization efforts are carried out by our U.S.-based primary care and specialty-oriented sales force, as well as through out-licensing partnerships."

Tuesday, July 15, 2008

Garmin set to follow PALM and RVBD?

We are buying puts on Garmin (GRMN), as we see competitive pressures building in a very unfriendly consumer environment. GRMN could be at $25 in August after they report earnings around July 30th. If you're uncomfortable with options, you could short GRMN, with a failure target at $48.50, and a profit target of $32.00.

Of course, this information is provided for educational purposes only. You should do your own research before investing in any equity or option.

Monday, July 14, 2008

Monday Morning Psychology Reaffirmed

"POTC stands by our sentiment since last Thursday... a bear market rally of staggering proportions is upon us. Although you will still hear many doubters on CNBC throughout the day, please understand the power of politics and the Treasury."

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Saturday, July 12, 2008

POSITIVES vs negatives Update July 12

"We have not witnessed an uglier week for investors in our life times. The tainted sentiment of the things we know about - real estate, mortgages, credit, banks, high oil - has been amplified to a disturbing level of panic. However we don't feel panic selling at this moment is justified as it only plays into the hands of the shorts attempting to wash out every individual long position. We believe that a concerted effort of changing that psychology is on the horizon, and the mounting tensions of a short covering rally on any good news at this time tremendously favors long positions."

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Friday afternoon's observation

The 10 Year Treasury Note is signaling a dislocation in the market. The yield has risen to 3.91% as of 1:15 pm ET.

This is a very bullish development for stocks, as those bond proceeds must be reinvested eventually, perhaps today? POTC is convinced that we will soon see a massive short term bear rally.

The Psychology of the Call Team.

Wednesday, July 9, 2008

Wednesday After Market Psychology

"Today's bond market rally derailed stocks. The 10 Year Note failed to hold above a 3.90% yield, but that will change tomorrow. The fact oil was down again today didn't seem to affect sentiment, as trading was fixated with Freddie Mac "FRE" and the other financial issues dropping like stones."

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Time Sensitive Trading Psychology.. Go Long

Good Evening, Good Morning to all!

We anticipate that oil will continue to fall this week, and we are optimistic for the S&P to stage an impressive bear market rally of perhaps 9% in the next two weeks, so as high as 1,390 is possible. Here's why and here's why you need to sell stocks again when the 10 Year Treasury Note touches 4.25%.

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Tuesday, July 8, 2008

Respect Trend Setting Tuesday

Good Evening to all!

Let's forget the barrage of speakers today: from JP Morgan's eloquent Jamie Dimon, to Fed Chairman Bernanke, to the nervous Secretary of the Treasury Hank Paulson, and others.

The key driver in today's bear market rally was..

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Tuesday Morning Psychology, More of the Same & a Stock Pick

"Greetings to all, we hope you are learning the art of market mechanics!

With oil down almost $5.00/barrel, the whipsaw effect is in order again. We urge our readers to not buy these false signals.. "

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Sunday, July 6, 2008

Positives vs Negatives Update, July 6th

"Good Sunday to you!

The positives have changed:
1) Election year;
2) GDP fails to signal recession (0.1 posted Thursday, June 26th);
3) Weak U.S. Dollar (greenback) http://finance.yahoo.com/currency/convert?from=USD&to=EUR&amt=1&t=5y
Will the positive trends of vacationers spill over & wake up the European juggernauts like Siemens, Nokia, and others to Euro-ize U.S. stocks? Be careful, as we did predict better prices after the fireworks and this would no doubt be a major driver for U.S. stocks:"

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Saturday, July 5, 2008

Forward-Looking Psychology of the Week's Economic and Earnings Data

"Good Saturday to all our readers! Monday, July 7th is void of any economic or market moving earnings releases. The drivers will be three fold: 1) constant mention of the indexes all down 20%, a theoretical bear market; 2) the fact..."

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Thursday, July 3, 2008

Wednesday Night Psychology

"Barring any FOMC out of step policy announcement in the morning, the stinging reality of crude oil above $144/barrel trumps all economic data, including the Unemployment data at 8:30 ET. "

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Wednesday, July 2, 2008

Wednesday Morning Psychology

Good morning to all.

The market just can't shake the financial sector's problems. Merrill Lynch (MER) looks to make a 52 week low today, and that doesn't bode well for the S&P Index...

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Volatility and Index Targets

The Psychology of the Call team embraced the volatility Tuesday.

Do we feel the climactic sell-off came.. no. We strongly reaffirm our previous Index targets: Nasdaq 2,150 and S&P 1,190. Nothing has changed from our weekend psychology. In fact, it has been reinforced, so please exhibit caution going in to the July 3rd Unemployment report as we feel it will not surprise on the upside. In addition, crude oil will continue to haunt the market, especially with the three day hurricane weekend potential, to say nothing of the geo-political tensions building within and between Israeli and Iran, and within Nigeria and Syria. We believe longs will lose and shorts will win, but we wish good trading to all.

The Psychology of the Call team is squarely behind your best interests, rest assured.

Tuesday, July 1, 2008

Tuesday's Economic Data

DJ US ISM Jun Prices Index 91.5 Vs May 87.0

DJ US ISM Jun Employment Index 43.7 Vs May 45.5

Dow Jones Newswires July 01, 2008 10:00 ET (14:00 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 10 00 AM EDT 07-01-08

The prices paid component (PPC) has never been over 90. In addition employment fell and the Unemployment report is due to be released on Thursday, therefore we remain bearish and await the climactic sell off.

Asian Markets Wilt

Asia stocks wilt, stagflation lingers

Nikkei 225 5-year chart

Shanghai Composite Index 5-year chart

POTC warned of these market inversions many months ago. Asia is important to many, and we called it EXACTLY right, Shanghai prints yet another 52 week low tonight. We believe the Chinese bottom will come many months after the U.S. S&P... caution. Although we criticize Jim Cramer now and then, we give him credit for finally coming around and avoiding Chinese stocks" ...

Folks

Sorry that Blogger - for some unfathomable reason - has been unable over a two day period to make their poll function work, but that's how it goes. Instead, with minimal pomp and fanfare we bring you our Market/Index targets: Nasdaq target 2,150 and S&P 1,190