Christmas Ornament

Start a new document, mine is 200px by 200px.

Use the Eclipse shape tool - Hold down Shift and draw a round shape on the canvas.

Apply the following layer styles to this shape:

Layer->Layer Style:

Gradient Overlay

Inner Shadow

Inner Glow

Satin

Create a new layer

Then set your foreground color to white, and select the BRUSH tool, with brush size 27px SOFT edge.

Then on this new layer, draw a white blob over the shape, creating a sparkling/shiny effect.

Now set this layer's blending mode to overlay.

Select the Rounded Rectangle shape tool

Press D to reset your colors.

Set the radius to around 3 - 5px.

Then draw a vertical shape on top of the ball.

Now go to Edit->transform->warp.

Now drag the four bottom handles outwards to create the shape like the picture on the left.

Then apply the following layer styles to this shape.

Drop Shadow

Bevel and Emboss

Gradient Overlay

Create a NEW layer

Select the circle marquee tool and make an oval selection above the yellow shape...

Now go to Edit->Stroke->

Then CTRL+D to deselect.

Apply the same layer style as the yellow shape above and we're done!

Example - Download .psd file here.

(Tips: To change the color of the ball, simple change the color of the gradients in the 2nd step)