Update on November 29

There is progress on the Dubai crisis. The UAE, which includes wealthy Abu Dhabi,  is apparently setting up a “liquidity facility” for Dubai banks. Whether this resolves the exposure of British banks was not stated. There still remains a potential reaction of investors to fears that other countries will default.Our guess is that these announcements lessen the probability of a huge downward gap on Monday’s open.

Bloomberg had an early positive report on retail sales, but we are cautious until more date comes in. Stay Tuned.

 http://www.nytimes.com/2009/11/30/business/global/30dubai.html?_r=1&hp

 http://www.bloomberg.com/apps/news?pid=20601087&sid=aYwTewBzcmMY

For our complete analysis on Dubai, obtain a FREE COPY of this weeks’ ETF-Letter on our website: www.etfdiscipline.com.

 November 28 Post:

Last week’s action and what to do about it:

With perfect timing when no one was trading, we got an innocuous news item that Dubai World could not make a loan payment. This event became a classic black swan, ripping through the Asian and European markets to greet Friday’s short session opening with a 200 point Dow gap.

Dubai is likely to dominate the markets until its resolution. There are worries that other sovereign debt might default, affecting EU banks. Greece, in particular, is having problems.

However, Dubai itself is small potatoes, and Abu Dhabi has the capital to fix the problem. If the Emirates keep the problem to themselves the issue will blow over. I’m guessing that Dubai will be resolved as a discrete news event on Monday or Tuesday, and the market will resume its normal gyrations.

The news last week was more negative due to projected lower 4^th quarter performance. Competing with the resulting negative sentiment is a possible good holiday season opening; however, any forecast available now is likely to be unreliable. We have no guess until we see spending reports.

Once shopping reports have come out, the market will drift through will drift in late December and focus attention toward earnings in January.

Most Asian ETF’s are looking weak. Healthcare (XLV) is the strongest ETF we follow.

There is no way to tell what might happen on Monday. Protect your portfolio and wait for news from Dubai and holiday spending.

Regards,

Paul Accampo