Yahoo/MSFT and Dow at 13000

Another week is over - quite exciting week and I was glad that quite a few of my predictions were correct.

• Dow is over 13000 (would cross 13500 by Summer 08)
• Yahoo/Microsoft deal is getting finalized close to 35 ( would most probably get done over weekend) - I was surprised to find out that May 30 calls were selling for 60-70 cents on Friday session. Upside-to-downside reward/risk was nearly 4:1 (potential reward of 400% vs risk of losing all money) - we know that markets are not efficient in short term
  
• Financials had one of their best week in last few months (8% weekly return in UYG)
  
• Emerging markets came in very strongly especially India, China and Latin America (7% weekly return on UUPIX)
  
• GDP came in at 0.6%
• Fed rate was cut by 25 basis points

Next week's predictions:

• Yahoo agrees to friendly merger with Microsoft between $35 to $36. Since it may happen over weekend, there would not be any opportunity to play call option strategy on Monday.
  
• Dow, Nasdaq goes sideways and remain range bound with exception of one or two days of good returns
• Oil stays around $110-115 range and Gold around $850-900 range
• Financials retain the gains made over last few weeks

Now that Dow is above 13000, I would recommend start taking profits on your stock investment and mutual funds and keep some cash on hand - we may see a bump (and buying opportunity) in late May/June 08

Have a good weekend !

/Shyam