Saturday, August 30, 2008

Happy Holiday Weekend

Gustav will dominate the news for the next several days (unless there's an Israeli response to the latest news release from Iran). We wish all US readers a Happy Labor Day weekend and all other readers an equally Happy Weekend. We will send out "The Psychology of the Upcoming Week's Economic and Earnings Data" on Monday.

Thursday, August 28, 2008

Gustav's Winds Cause Free Market System to Hiccup… Election Year Politicking

POTC believes today's sustained momentum is synthetic. We predicted a bullish GDP number and did say Mon-Thurs would be neutral to bullish, but the lack of volatility due to today's intervention rhetoric has us disgusted. A cheer for the free market system? Not today. The overhang with rising unemployment and the "foundational crack" at Freddie and Fannie will destabilize the equity markets sooner than most talking heads will lead you to believe. We bought S&P emini S&P puts today at 1,298, and will buy an equal number around 1,305 IF the S&P has another synthetic reflex rally tomorrow. POTC does not believe that news from the IEA should be driving financials higher. Perhaps Gustav will miss the major oil & gas properties, the SPR will not have to be tapped, and crude will climb due to geopolitical issues in Israel or Russia or Nigeria over the three day U.S. Labor Day holiday. We wish all our forward thinkers a good day.

Saturday, August 23, 2008

Psychology of the Upcoming Week's Earnings and Economic Data

Good morning and good evening, wherever you may be reading! The S&P 500 Index was down for the week, FRE and FNM fell below $5.00/share, simply a very troublesome development that may create hedge fund problems. Could the huge drop in crude on a Friday be related to hedge funds screaming for liquidity, especially after Goldman Sachs called for crude to rise to $150/barrel by year end? That's what we call a dislocation. The strange actions from Russia will not go away easily; even Vice Presidential candidate Joe Biden agrees: Add the hanging potential for an Israeli strike against Iran's nuclear facilities, and do you see obvious reasons for bullishness? POTC feels the bear market rally on Friday is a good lesson in market mechanics, as FRE and FNM's precipitous price erosion has caused a market dislocation. We remind you September has historically been the worst month for the stocks. Next week also brings the three day Labor Day weekend, so great caution is urged late in the week, but especially on Friday. From an economic perspective, Monday-Thursday looks to be... - - - - - - - - - - - If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Friday, August 22, 2008

Scrathin' & Sniffin' Freddie and Fannie, Yuck

The fact FRE and FNM cannot stabilize in a bullish tape is very bad news. More troubling is the fact FRE and FNM broke that magical price of $5.00/share, and we feel the talking heads will begin addressing hedge fund dislocations caused by being forced to deleverage their portfolios. Please understand that hedge funds use individual issues to leverage from, and FRE and FNM looked okay just days ago, agree? So when you see bad stocks move up and or good stocks move down, that is typically a result of hedge funds being forced to liquidate positions they still feel strongly about, yet cannot afford to hold as the margin clerk rings, therefore the term dislocation. We look forward to sending out a detailed "Psychology of the Upcoming Week's Earnings and Economic Data" Saturday. Until then, we wish you a fun, safe, and happy weekend. We are working very hard to bring you ideas that will educate you in market mechanics, and enable you to profit consistently. Best to all, the Psychology of the Call team.

Thursday, August 21, 2008

Bill Gross Frustrated the Same Day Russia Stormed Georgia: Coincidence?

This is what Pimco's Bill Gross said: *DJ Gross: Agency Spread Widening Doesn't Make Sense-Bloomberg TV (MORE TO FOLLOW) Dow Jones Newswires August 06, 2008 14:42 ET (18:42 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 02 42 PM EDT 08-06-08 Perhaps Russian investments in the U.S. have more influence in our markets than CNBC talking heads are reporting? POTC thinks so. Just consider the staggering amount of oil profits funneled through Russian hands in the last year with crude breaking through $100/barrel, and realize some of it bought U.S. agency paper, especially FRE and FNM. On August 6th, when Bill Gross said "agency spread widening doesn't make sense", it happened to be the day... ------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Tuesday, August 19, 2008

positives vs NEGATIVES, Update August 19th

The positives have changed:
1) Election year: The psychology of a new administration taking over the reins rarely hurts the equity market. Both Senators will be announcing their Vice Presidential selections very soon, and that will cause some reallocation of monies by institutions… caution. Consider what happened to Halliburton shares in the last 8 years since the installation of V.P. Cheney. So, for those who think money & banking aren't interrelated, think again! We ask you to handicap both Vice Presidents and see whether there is some corporate background or some legislative history that would favor a certain sector, i.e. biotechnology/stem cell research.
2) Gross Domestic Product (GDP) fails to signal recession: GDP has not broken through zero - and we stated in the past we do not feel it will - but we're concerned with dark clouds forming in Asia and Europe. Is it possible that the Asian and European slowdowns will worsen and our GDP will break through zero? POTC is definitely monitoring that, but as of today, GDP remains in the positive column.
3) Extreme pessimism in the Michigan Consumer sentiment looks to have bottomed with oil breaking down over $35/barrel from its peak.
Will the consumer begin spending this extra disposable income on clothes/retail goods as gas falls below $3.50 or $3.00? That's the $64,000 question. Some economists feel the psyche of the consumer is broken for months and maybe years to come; what do you think?
The negatives have changed:
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Monday, August 18, 2008

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: 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: 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

Friday, August 15, 2008

Friday Intraday Psychology

Good Friday Morning,
Oil dropped several dollars this week and the market faded the move. If oil were to spike up next week it would have no effect on the consumer, but the psychological affects on the market could be significant and we look for the 1,250 gap to be filled on the S&P. If that happens it will present a swing trade opportunity for longs. Watch the S&P in to the close today and prepare to buy should it close the gap next week.

Tuesday, August 12, 2008

Did Deutsche Bank Miss the U.S. Financial Rally, S&P Update, Russia and LDK

Good trend setting Tuesday morning to you! With financials being a very heavy sector in the S&P index, it would bode extremely well for the bulls IF the S&P managed to close up in the face of Deutsche Bank's downgrade of Goldman Sachs (GS). POTC believes the markets are looking healthier post-FOMC on account of a stronger greenback, therefore lower oil. We believe Deutsche Bank's rating change is more political than fundamental, so we won't hold onto our S&P short position IF GS prints $175 or >. We hope this doesn't happen, but we want you to understand the psychology behind managing our S&P trade. The Russian conflict is the scariest post cold war offensive, and POTC, like most experts are bewildered by the situation and a potential solution. A solution looks to rest solely in Putin and Medvedev's hands, and it's difficult to trust those men. POTC feels the conflict could escalate since the U.S. is stretched militarily, and the United Nations ability to negotiate has been less than stellar in past conflicts. Please be aware of the convergence of positive factors since the FOMC meeting: hawkish rhetoric, stronger greenback, lower oil, and higher equity prices. Do you believe all those dynamics will continue… we don't. We alert you to the fact that there is a gap in the 1,250 range in the S&P that occurred last Tuesday, exactly one week ago. We also caution you that the market has been too kind since Friday, so a pullback without any excuse at this point is likely, and IF a fundamental excuse develops, then 1,250 is our target. We are also monitoring LD Solar (LDK)/ADR closely. We will update Wed night on a potential short set up, not yet, as the stock is exhibiting exceptional momentum. *DJ Goldman Sachs Cut To Hold From Buy By Deutsche Bank. (END) Dow Jones Newswires August 12, 2008 00:38 ET (04:38 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 12 38 AM EDT 08-12-08 A great trendy Tuesday to all, we hope you enjoyed the Psychology of this Call.

Monday, August 11, 2008

Monday Intraday Psychology, FSLR, OIL, S&P

Good Monday to all our forward thinkers ~ The indexes are up intraday as oil continues its pullback, disregarding geo-political tensions, caution. Even though the markets are the best discounting mechanism of the future, they exhibited a two day lag to the Paulson-FRE-FNM-Treasury news one month ago, and POTC sees a similar scenario unfolding. We predicted oil would break $120/barrel and the alternative energy plays would fall many weeks ago. Although we don't know Pete Najarian's current opinion on coal, we do know he was very bullish. Peabody Energy Corp. (BTU) was one of his picks and it's down from the $70 range to $53 today. Also, Cramer's pick First Solar Inc. (FSLR) has pulled back sharply as well. -------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Saturday, August 9, 2008

Psychology of the Upcoming Week's Earnings and Economic Data

Good Saturday to all. Allow us to begin on this Olympic weekend by offering our sincere best wishes to the Chinese hosts and to all the countries participating in the Beijing Olympic games. Let the games begin! Now on to the Psychology of the coming week’s earnings and economic data Monday, August 11th has no economic data scheduled. We don't expect the market to behave as it did Friday, when the rally was driven by the strong greenback, which in turn pushed the oil bulls over the cliff. POTC did predict the Beijing starter's pistol marking the end of the massive Olympic build out/strain on crude oil and many other natural resources. Now that shot is being heard by all as it reverberates throughout global financial markets, but... ------------ If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Friday, August 8, 2008

Friday's Time Sensitive Intraday Psychology

Good Afternoon to all! The markets continue to fool the herd at every turn, yet we are more than satisfied with the reality of crude being down almost $4.00/barrel at 12:30 pm ET. The oily bulls have had a stranglehold on long equity positions for too long, and as the saying goes, 'paybacks are a b-w-itch'. POTC stands by our Thursday recommendation to short the S&P into strength, and we have initiated a short position in the S&P emini futures contract at 1,288. Only aggressive portfolios should follow our lead. Besides oil, which has fallen over $30/barrel in less than a month, there are no catalysts Monday or Tuesday. We feel the potential for geo-political tensions to erupt over the weekend, as well as unforeseen events at the Beijing summer Olympics trump the move down in oil, therefore we have strong conviction shorting the S&P at 1,288. We do not feel today's S&P gains are sustainable as the day evolves... We remind you of the prediction we made regarding the oil trade months ago: “Remember, our belief is the crude oil bubble will burst after the Beijing Olympic starter pistol is shot, and that shot will be heard around the globe in August.” We wish everyone a happy and healthy weekend. We always stress practicing the 11 Commandments since the market is two sided and offers you great leverage. We urge aggressive portfolios to take advantage of the opportunity today. The Psychology of the Call team welcomes you back Saturday night for the "Psychology in the Upcoming Week's Data."

Thursday, August 7, 2008

Intraday Oil Reversal and a Trading Prediction

A good Thursday to all! After another weak showing in weekly unemployment numbers, the markets hiccuped and had difficulty from the start. The crude oil dragon's attempt to gain traction to higher levels exacerbated the selling pressure, as crude touched $122/barrel briefly from a close below $118.58/barrel Wednesday.

With crude trading flat to slightly down after a $3.00+/barrel intraday reversal, the major stock indexes are mixed.

There is no market moving economic or earnings data scheduled for a few days, so please sell/short the S&P into any strength. Tomorrow's focus will be on another weekend of Israeli & Iranian tension, potentially driving crude a few dollars higher.

Again, with no catalysts to drive the S&P higher Friday, Monday, or Tuesday, we strongly feel it is wise to either go short the S&P, or just exhibit patience and hold cash. Tuesday afternoon will be the first good opportunity to go long, as lower prices are almost a certainty Friday, Monday, and Tuesday. The first substantive economic data comes Wednesday before market open (Retail Sales) and the reaction should be bullish in our opinion. Long positions in the S&P will be rewarded on Wednesday, so late Tuesday afternoon will present the swing opportunity. POTC would not be surprised to see the S&P pullback to 1,250 by Tuesday afternoon.

We urge our readers to practice the 11 Commandments, as they hold the key to short and long term success. The Psychology of the Call team wishes all a wonderful Thursday, and please exhibit patience during these boring summer months. We leave you with a relaxing song/video, Girl from Ipanema by Stan Getz:

Psychology of the Week's Remaining Economic and Earnings data

Thursday, August 7th brings Initial Claims for Unemployment for the week ending 8/02 at 8:30 ET.
Last week's revelation of over 40K workers added to the unemployment lines was unwelcome. The number came in at 448K on a running monthly basis, just plain ugly. Please refer to our Saturday piece "Positives and Negatives at Equilibrium" for more commentary. POTC does not see any quick relief in sight, except for the infrastructure plan we've been clamoring for in the last several weeks. Since lowering interest rates would equate to an economic 'suicide solution', only the Keynesian argument, embraced by ex-Pres candidate Huckabee, has merit.
Would many be opposed to a government stimulus package focused on building out U.S. infrastructure, better and newer bridges, roads, waste and water plants? That makes better sense to POTC than sending out $600 or $1,000 checks, agree? Before market earnings from: Corrections Corporation of America (CXW) Q2 2008, estimate for $.29 POTC feels these shares make sense in an environment with 5 year high unemployment:
After market earnings from: Deckers Outdoor Corp. (DECK) Q2 2008, estimate for $.23, World Fuel Services Inc. (INT) Q2 2008, estimates for $.49
Friday, August 8th brings no market moving economic data. Before market earnings from: DrilQip Inc. (DRQ) Q2 2008, estimate for $67, Mirant Corp. (MIR) Q2 2008, estimate for $.54, OYO Geospace Corp. (OYOG) Q3 2008, estimate for $.54. We recommend buying shares of DRQ and OYOG on pullbacks, as the Obama drilling sentiment could grow legs when the House and Senate birds return from their migration patterns. DRQ and OYOG are just two companies positioned to benefit from drilling, so counting out the all important fossil fuels is not recommended on this Island. The Psychology of the Call team.

Tuesday, August 5, 2008

Joe Terranova

We promised to update Joe Terranova's position on crude position.

On Monday, at 4:45 pm ET, Joe Terranova appeared on CNBC's 'Closing Bell'. He told Dylan Ratigan that oil will remain between $120 and $130. POTC disagrees with Joe, as our readers will know only too well. Numerous times over the last two months we have stated that, in our opinion, the crude oil will burst "when the starter pistol is fired" in the summer 2008 Beijing Olympics.

Could our prediction 2 months ago be coming true? We hope so...

The Psychology of the Call team

Sunday, August 3, 2008

Performance Update

It’s time for a quick update from Psychology of the Call.

Loyal readers who have benefited from our analysis for months now will know that we have been steering you through market actions and reactions, sending you in the right direction. The psychological aspects of economic and earnings data, political developments, international affairs, and global currency valuations are so often ignored by other commentators, but we consider them to be an essential component of any attempt to interpret and understand market mechanics. We use fundamental and technical analysis, but add in a heavy dose of human psychology. Often it works well. Here are a few more recent examples.

Genentech (DNA)

During our 10 April analysis of the DNA conference call we wrote: “For investors seeking exposure to biotechnology, Genentech is the cream of the crop. We would wait for the Lupus studies to be announced within days and, since management sounded pessimistic on this front, buy shares on that potentially terrific pull back. Chicago's May 30th ASCO conference looks to be very positive for investors. "We also mentioned DNA as a candidate for Euro-ization and Swiss giant Roche obliged.

Please look at the chart below.

Garmin (GRMN)

We suggested in April that you short GRMN at $56. Then on July 15 we suggested that you buy puts because of what we viewed/predicted as competitive pressures, both micro (internal, company specific) and macro (external, related to economy).

Please look at the chart below.

Other examples include a 125% gain on Google (GOOG) $500 Aug put options and a 400% one day gain (22 July) on Apple (AAPL) August 155 call options, suggested in an e-mail note sent out to our subscribers. “POTC does not believe AAPL's 200 day moving average of $158 will be broken on close Tuesday. We recommend aggressive portfolios take advantage of Tuesday's open, as the negative sentiment has been exacerbated by unrelated companies, specifically American Express (AXP) and Merck (MRK).”

In our recent piece Four NEW Reasons for Optimism, we called a bottom in financials and recommended BAC and JPM as conservative picks. Both have appreciated in price in the few days since.

We will admit to losers. We were very upbeat on Sepracor (SEPR), which has since dropped around 15%, but our confidence is not shaken and we continue to hold stock and call options.

While not making an overt buy recommendation, we did mention recently that AKAM was our favorite of the companies reporting earnings on Wednesday 30th July. AKAM dropped 24% after earnings. They had okay numbers but a horrid conference call filled with excuse after excuse. It would be hard to find a worse management team in terms of communication and conviction.

Those are a few samples of our successes. We hope you've been able to use our insights, based on many years of experience at high levels in the markets, to make some cash. Any and all comments are welcome below.

The Psychology of the Call team

Saturday, August 2, 2008

Positives & Negatives at Equilibrium, August 2, Survival Mode

The positives have changed:

1) OIL OIl Oil oil ... .. . , will it break below $120/barrel this week? We think so. First, congratulations to Joe Terranova, as his prediction of crude holding $120/barrel came true. Psychology of the Call team (POTC) did write oil would "probably" not break $120/barrel because of the Iranian tensions, but we were in fact hoping Joe was wrong nonetheless. We weren't impressed with the tiny move up for the week though. Even so, hats off to Joe Terranova, as we give credit where credit is due! We're not aware of Terranova's latest opinion, but we assume he's still long, as we're still short. Our opinion of oil breaking down has not changed since it rose to $120/barrel. The very day it peaked at $147/barrel, we were lucky and called the very top, as verified on the blog archive.

Senator Obama's position on drilling now has changed. We urged...
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Friday, August 1, 2008

Friday's Mechanical Update

Good Friday morning and afternoon to all…

After the unemployment number came in at 5.7%, it's difficult for anyone to be bullish. Jobs are the tell-all to the most astute economists on the planet, but just wait a second before selling.

POTC believes the sell off this morning could be met by major swing buying before the close IF oil breaks under $123/barrel. Although it doesn't look likely at 9:55 ET, as oil is up, this highly volatile commodity must be monitored closely as the contract closes at 2:30 pm ET. Here's a trust that follows the evil commodity for your reference:

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