News broke out of attacks in india's mumbai. US markets are close tomorrow. We will check asian markets, futures markets, and currency markets to see the reaction, particularly the reaction of if the indian ruppy against the dollar.

12:52AM: indian financial markets have closed as a result of attacks. Not sure when they will open.

Updates will follow. Subscribe to the blog for insider information, and updates on developmens and major implications of such incidents on markets.

PS: Enrollment is at no charge to you, and can be done by sending an email to marketwarnings (at) gmail (dot) com

spx qqqq dow dia sp500 trading price prediction (profit taking):

On Friday November 21, 2008, we made a stock market call to buy the bottom. It was the absolute bottom (read post of Friday).

Today is Wednesday Nov. 26, 2008. We are making the following call:

At 12:57PM: we are make a call to take your profits off and consider scaling in a short market position with a size equal to a quarter of the size you have used for your long position of last Friday.

Market is currently at following levels: Nasdaq-100 (1176), Sp500 872 , Dow index at 8599.

The Friday bottom call was correct, and has led to 17% return for SP500. The returns are higher for the other indices as they are more volatile. We will do the calculation for the other indices later, as we are now busy with the market.

PS: do not forget to enroll in the list of blog insiders. Enrollment is at no charge to you, and can be done by sending an email to marketwarnings (at) gmail (dot) com

To your profits!

Stock market futures (in US pre-market opening) have shot up some points a few minutes ago. This is apparently in response to the deal reached on the bad assets and operating capital of Citibank (stock symbol C).

This will be a confirmation of the stock market bottom we called on this blog in the previous two posts (Nov 20 2008 for retirement accounts, and November 21, 2008 for during day trading accounts).

Terms of the deal between US treasury and Citi are apparently as follows:

300 billion "backstop" on Bad Assets

20 billion infusion at 8% per annum

We are not sure on the terms of equity stake by US treasury in Citi bank by US treasry nor on management changes, but the main points:

$20 bn preferred @ 8%, perpetual or redeemed in stock or cash

$7 bn of preferred stock with an 8% dividend rate as the "fee for guarantee"

Govt. gets warrants for 10% of the $27B of preferred stock, ie. $2.7B worth of common stock warrants. Ten year term, and warrants are not subject to eventual future dilution ( "The warrants issued to UST are not subject to reduction based on additional offerings.")

We think this is a good deal for all parties. Read below the discussion on dilution.

This deal is bullish for the stock market. The finance sector would get a strong rally tomorrow Monday. Our market calls in the two previous posts are then perfectly timed!

A question that should raised for stock holders is whether deal is dilutive or not. The answer is not clear as it depends on future performance. Warrants implicitely dilutive. The $20bn is not clear.

government receives 8% dividend/interest . This has to be paid. It can be dilutive depending on increase if earning as result of deal is less that interest/dividend paid.

Government receives 8% dividend/interest . This has to be paid. It can be dilutive depending on increase if earning as result of deal is less that interest/dividend paid. In near term it would be dilutive, but longer term it would not. Since stock is a perpetual option, stock will assess tradeoff tomorrow .

If market focuses on near term, stock price of Citi should go down, but we will see what the market will tell in 6 hours from now.

If C goes down, we expect it to hit a bottom and then head up. The $5 level might however create a problem as large holders are not allowed to hold stocks priced at $5 and less. If there is no reverse split, we expect the $5 level to constitute a resistance.

Therefore, we plan to buy the stock if it goes to area of $2, and sell it on rally, on the assumption that it would make 150% gains (multiplied by 2.5 at best).


Stay tuned, we will time it during market hours.

Before you leave make sure you subject to blog and also read the previous top posts in which we made the call that nailed the BOTTOM of Friday November 21, 2008.

PS: Enrollment is at no charge to you, and can be done by sending an email to marketwarnings (at) gmail (dot) com

To your profits!

This is a stock market call for those who make execute trading orders during the day. For those who can buy only at close of day, a stock market bottom call was made yesterday, as we predict the stock market to finish in the green today Friday Nov. 21, 2008. Expect a rally to come out of nowhere later today, even the market is red and gloomy as we write this post.

The market call is as follows. Ddow spx stock market bottom November 21, 2008:

At 11:07AM, spx (sp500 index) is at 741, djia (dow index) is at 7445.

Our analysis is telling us that this is the bottom!

PS: do not forget to enroll in the list of blog insiders. Enrollment is at no charge to you, and can be done by sending an email to marketwarnings (at) gmail (dot) com

Stock Market Bottom 2008 (SPY, DOW, SP500, Nasdaq 100): (for reitrement account that trade at close only)

SP500, which can be traded via the SPY ETF, is in the 780 area as we write this post. If we are not in a depression, then bottom of this bear market should be in the 780 to 750 area. Consequently, one should covered in any short stock market position, shift their mindset, and start accumulating and buying dips while we are still in the bottom area.

For long time positions, the SP500, if it rebounds in a major bull leg, should go to the 11000 area, but 1200 should form a cap on any eventual such solid upmove.

We are building a position for our retirement account.

If the current levels of SP500 (780 to 750) do not hold on downside, then we might be in a depression, and not in a bear market. But we think that it is a bear market, and that we have reached the bottom area.

Conclusion: We think that retirement positions where one can trade only at market close (majority of mutual funds) should be establised at market close of today November 20, 2008.

PS: do not forget to enroll in the list of blog insiders. Enrollement is at no charge to you, and can be done by sending an email to marketwarnings (at) gmail (dot) com

There is a well know pattern that when US market sell-off, and Asians have not done it yet, then the Asian markets will sell at the following session. Some traders swear by this as one of their secret weapons.

Well, today they were right once more. As of the time of this writing, the Nikkei is down nearly 500 points. The Hang Seng is down over 6%. Singapore is the least of the trashed, minus 3%.

Every sell-off serves as a magnifier of bad news. Note that some people think that the bad news is the cause of a sell-off, and journalists often make this mistake in their reporting. But it is a false belief.

There is nothing that trigger this except for momentum. When the markets are in a sell-off mood, they continue in their sell-off and do so in unison until there are
no more anxious sellers or there are smart buyers entering the market and are ready to bid it up.

It is supply and demand that rules.

But if you believe in bad news as a reason for sell-offs, here are some for you:

1. A lousy industrial output report out of China, confirming the various informal indicators of economic weakening there we have tallied

2. Paulson's opening his mouth to say what everyone knew he would do, which is to do with the bailout money something other than what was written/planned in the bailout. Apparently he stated something like "let's bailout credit card debt so the banks can let consumers get themselves in even further over their heads."

The next time Wall street is up, you can do the other trade. But Asian market the next session, which is our evening.

If you want to play Asian market, there is a futures index that is good for that. It is the Taiwan futures index. It trends, is liquid, and does well. It trades on the Singapore stock exchange. Ask your broker, or email us and we will provide you with the broker with whom we trade.

Note: You will need to trade it in a futures account.

Intel warned that the financial results for its current, fourth fiscal quarter to be "below expectations". Intel stock INTC was hit hard in after hours trading, which is typical of stock that issue lower guidance in a bear market. Intel is a technology bellwether. It put the reasons for lower guidance on the economy. That is usually what they do when there is general consensus that economy is weak.

INTC closed at 13.52, and dived to 12.50 area during after hours trading. That is a big gap drop for a major technology company!

Other companies in the same area issued warnings including AMD (applied material), and CSCO (Cisco).

Real-test for technological sector will be Friday of this week, as we will know whether it will rebound from today's selloff and recent negative news.

We expect another wave of layoffs in technology sector. AMD already announced some today.

SPY, Nasdaq 100, SP500, DOW, Stock Market Bottom 2008):


Our last call on this blog was to take profits on longs, and go short on October 31, 2008. We are now issuing a new call, a long call.

This would be the four time we call the bottom successfully, after we have called the bottom successfully three times below (read successul calls of the stock market bottoms of October 10, October 16, and October 23).

We are making this call to inform the readers that the market is now in the area of the bottom.

11:47AM (November 12, 2008): with DOW at 8380, SP500 at 866, and Nasdaq 100 (NDX) at 1189, we are calling the bottom of the stock market.

Enroll to the blog for insider information by emailing us at marketwarnings (at) gmail (dot) com.

Happy trading and investing!

PS: before you leave, do not forget to enroll to the blog for insider information by emailing us at marketwarnings (at) gmail (dot) com.

China announced a major economic and financial plan to boost economy and markets. The question that investors and traders should ask is who is going to win or lose by this plan. Thus, the article titled: Stock bond imapcts of China $586 billion Bailout (winners and losers).

Impacts are (Pay attention to 2):

1. Risk appetite should return or at least risk fear should reduce, therefore less volatility, and more initiation of carry trades such as EUR/JPY.

2. But the US may suffer from this. To see why, one should ask how will China finance this plan? They would either print money at home, and/or buy less of US bonds and/or sell US bonds.

Therefore the impact on the credit market and US consumer will be negative, as part of this plans will essentially come back to the US in the form of exodus of dollars towards China or at least less US dollars coming back to the US from China to be invested in bonds or in buying other assets.

3. China will likely put money in infrastructure as they do not possess yet high technology expertise.

The effect of this is that Steel stocks should rise.

Energy stocks should also rise, as a stimulation of China means consumption of energy, and therefore more money for energy stocks.

If you are a stock investor, steel and energy should be an area where you can play the China boost plan.

4. A loser would be the Chinese people as they wills see more inflation if China finance the boost by increasing their money supply.

5. As discussed above, US and Chinese citizens will be hit by higher borrowing costs for US, and by inflation in China. Citizens are last in chain, and always pay the final bill.

Is An Attack on Iran Syria Coming Soon

President-elect Barack Obama may have just given (without possibly realizing it as he may have not meant it) his approval to an attack on Syria and Iran. In his first press conference, we went against Iran and essentially took the same position as the current administration.

To understand the significance consider the opposite, which is if he did not make his posture known before taking office in January. If he did not make such a posture in a press conference (with his chief of staff), it would have been hard for the current administation to justify an attack on Iran. Now it is easy for the current administration to justify it, as Obama has put himself inline with its views on Iran, and did it voluntarily and before taking office. You would hear an argument such as if he did not mean it, he would not have or should not have spoken out!

Here are the other elements that are well aligned for an attack on Iran and/Or Syria before the new administration takes office:

1. Oil price is now low. Therefore an attack, while it would raise oil price, oil will not cause a problem, as oil's peak is behind us. Oil companies would even welcome the attack as it is good for business.

2. Stock market has stablized.

3. Obama cannot protest as an attack would be in line with his declared posture with respect to Iran and Syria.

4. Stock market has stabilized.

5. If there is an attack, Iran may not relaliate as it would wait for the official beginning of a new administration. In this sense, Obama's administration will not use the stick (as it would have already have been used).

6. Oil exporting countries would also like the attack as it would raise the price of oil.

7. Current administration would have not left without having hit its enemy Iran.

8. Even Iran's leadership may want the attack as the would say that their posture was well justified.

9. Israel would love it! They know they do not have the courage and capability to fight Iran, so anyone who can do the work on their behalf is their best friend.

10. The friends of Iran would also like the attack as they would use it to justify their militancy.

The only party who would oppose this are the peace loving people, which includes a large majority of those who voted Obama.

If you have a retirement account or planning or investing for retirement, stop what you are doing and read this note, and get ready to ask your advisor if you have one. If you do not, you need to think or seek advice.

This note was triggered after we have looked at how the fed has recently played its hand, and we think we are reading Ben's hand correctly.

You may have noticed that the Fed and the treasury moved in a direction of buying equity in banks. People may have viewed this as helping resolving the credit crisis, building confidence, building capital base, etc. All of this is possible, but what about the one element that have not been mentioned so far.

To understand, let us go back to the Japanese crisis. Their crisis was a deflation, and they did not understand it until they hit the wall by setting interest rate to zero, and therefore could not put it a lower level.

They then understand that they had a problem of deflation. What did they do?

They started accepting weaker collateral, and bought share of banks to protect bank lenders collateral.

The latter is exactly what the Fed and treasury are doing, and I think it is what they have in mind. They seem to have realized that what they have is a deflation similar to Japan.

Japan did not understand the problem, and it is the reason they did recovered so far after more than a decade now.

But let us look at the question that matters to you the investor (retirement account savers, and if you are in a retirement).

How could your money grow in a world of zero-interest rate?

Using the current investment paradigm, if indeed we have a situation like the situation Japan, you account will be be stagnant or lose money, because in a context of zero-interest rate, one is in a deflation. Therefore investing in capital gains will lead to losses as prices decrease in such context.

The other choice one typically have is to put their money in a cash account. This as well is not a good strategy, because your account will not earn in dollar terms.

This can be devastating particularly for people already in retirement. Usually interest earnings allow them to cushion against depletion of account size.

This is also a bad situation for those in building years, as there is no compounding.

What to do? First ask your financial advisor to test him or her. Most likely he will be clueless or will be giving arguments that it would not happen.

However, insist on an answer in the sense of what if (to at least test the guy or gal!)

The second things you do it to learn different ways to invest. Those tools involve (in addition to playing the short of markets using inverse funds for instance) non traditional ways such as making money selling option premium, and other less known tools, in addition to building other source of income that require some little work but which are passive in nature.

Send us an email to enroll, and also to put your name in the list of those who will receive reports on how to make money in the zero-interest rate and deflationary world.

Email: marketwarnings (at) gmail (dot) com.

Recent Entries

Recent Comments