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.

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. http://www.reuters.com/article/hotStocksNews/idUST14048520080828?rpc=77

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: http://biden.senate.gov/press/press_releases/release/?id=36fe9293-3b03-424d-8dbb-2a969b5e30f9 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 Psychologyofthecall@gmail.com and make sure that your e-mail client will not consider messages from that address as spam.

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.

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 Psychologyofthecall@gmail.com and make sure that your e-mail client will not consider messages from that address as spam.

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. http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/gdp.htm

3) Extreme pessimism in the Michigan Consumer sentiment looks to have bottomed with oil breaking down over $35/barrel from its peak. http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/mich.htm

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'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

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.

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 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 Psychologyofthecall@gmail.com and make sure that your e-mail client will not consider messages from that address as spam.

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. http://psychologyofthecall.blogspot.com/2008/06/psychology-of-coming-weeks-economic.html 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 Psychologyofthecall@gmail.com and make sure that your e-mail client will not consider messages from that address as spam.

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.” http://psychologyofthecall.blogspot.com/2008/06/psychology-of-coming-weeks-economic.html 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."

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: http://www.youtube.com/watch?v=A1ydCI-XybM&feature=related

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. http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/claims.htm

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. http://en.wikipedia.org/wiki/Keynesian_economics

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: http://www.correctionscorp.com/about/

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.

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

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.
http://psychologyofthecall.blogspot.com/2008/04/psychology-of-genentech-inc-dna-q1-2008.html

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).
http://psychologyofthecall.blogspot.com/2008/07/garmin-set-to-follow-palm-and-rvbd.html

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

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'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:
http://finance.yahoo.com/q/ta?s=OIL&t=1d&l=on&z=l&q=c&p=&a=&c=

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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":

http://www.youtube.com/watch?v=YCKANiM9tUM&feature=related

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 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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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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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):

http://psychologyofthecall.blogspot.com/2008/06/four-whom-bell-tolls-potcs-four.html

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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