"Interesting times" getting closer by the day, folks! (There's an ancient Chinese curse that says "May you live in interesting times...")

I see the Dow (DJIA) continues to fail to get any higher (see WICS of 19/20 March for more about this) and has now fallen back even further.

I note too that for some time, Dow volume on 'down' days has been greater than on 'up' days and that's a sign of weakness for sure.

There's very little doubt now that we are at or very near a major top in world stock markets and that any further upward moves will just represent some more 'kicking' against the true facts - things could well go pretty much sideways for a few weeks still, but I think the chances of there being any sustained upwards movement in major markets, are now very low indeed.

I received a couple of emails from you during the week suggesting that I must be very wrong in my assessment above - the reason being that my correspondents had read that the second richest man in the world (Warren Buffet of Berkshire Hathaway) has just risked quite a lot of his fund's vast assets in providing an 'insurance policy' to some other stock market funds.

He has committed up to $14bn in the form of a hedge ('insurance') against falling stock markets, by having sold 'put options' to various fund managers - that's to say, if prices of stocks in these funds fall below a certain level, Mr Buffet's fund will have to pay out, thus protecting the other funds from most of the potential losses.

Therefore, given that Warren Buffet is somewhat richer - ie more astute - than Ian Williams and that he would be unlikely to wish to lose $14bn even though that's pocket money to him, surely the fact is that markets are NOT likely to drop?

A perfectly understandable question of course, and I have little doubt that Mr Buffet is indeed more astute than myself, but the question just demonstrates the danger of 'a little knowledge' on the part of journalists. (Yet again!)

What am I getting at?

Just that to lose $14bn the way he has structured things, Warren Buffet would have to see most of the world's major markets drop to zero! For him to lose just $1bn, there would have to be a 30% overall fall - and that is by no means unlikely in my view over the next few years - so it's my belief that that figure ($1bn) more or less quantifies his true risk.

So does that still mean he's dumb to risk losing so much? Not at all - I don't know the premium he charged for the sale of the 'put options' but believe me, it would have been a heck of a lot more than $1bn - probably more like $5bn!

He therefore stands to make a huge profit even if markets were to fall by 50% - as I said, he's no dummy!

And in my view, the above action strengthens my case that markets have topped or are about to do so - my reasoning being that much of the 'smart money' in the big hedge funds is clearly aware of the overall state of the markets, because otherwise they would have had little interest in paying up for insurance, and even if they had done so, they wouldn't have been prepared to shell out enough for Mr Buffet to have been willing to do the deal. It's pretty clear to me that Berkshire Hathaway is of the view that markets have pretty much peaked and they chose their moment rather well to promote their options sale.

All of which goes to prove yet again that most financial journalists are about as clueless as they come.

Anyway, moving along, I see that (allegedly) house prices are again rising but according to Lombard Street Research that's 'nae problem' because they are 'still affordable at current interest rates'. That's OK then, because interest rate rises have just been banned for ever.... It amazes me that anyone could imagine rates can't rise to the point where they cripple mortgage payers - ask the good people of Iceland for their opinion on this right now.

Next, according to the Co-Op Bank, there is an 'unprecedented level' of consumer debt and a 'significant rise' in bankruptcies - too many people are not just facing potentially rising mortgage rates, but also somewhat unmanageable credit card bills.

Sadly, much recent remortgaging seems to be 'debt consolidation' which is really no more than deferring the evil day till the bailiffs come knocking - how many people pay off their Visa with a remortgage and immediately take the scissors to the credit card to avoid further temptation?

And if you think the banks will suffer from recent changes regarding their 'late payment' charges, think again! They'll just make up the lost profit somewhere else, that's for sure, whether by hitting you with current account fees, or increasing the interest rate on the credit card, or whatever else they can sneakily dream up.

Bob Prechter of EWI puts things rather well when he suggests that the general public is now so far removed from facing economic reality that it is no longer simply 'in denial' regarding debt levels but is now in a state of 'total disconnect from reality' - again a reason to consider that market fundamentals are a lot less rosy than we might wish to believe.

Moving on, I note that many people (especially financial journalists....) are up in arms (pun intended) about BAE's decision to dump its 20% holding in the Airbus project - shock and horror that they are 'turning their backs' on a 'Great European Co-operative Project' to focus more on their USA military contracts. One headline I saw was 'Selling the Family Silver'.

What nonsense - however 'anti military' you might be, if you can set your feelings to one side and objectively analyse probable events over the next few years, what's likely to make more money? A massive, elephantine plane that might not even be able to land at Heathrow and that so far has not received one single order from either the USA or Japan, or loads of orders from an ever - increasing USA military budget? That's a hard one, eh?

Next today, a wee story that I received from one of you during the week (thanks, Bernard!) - I thought I would share it with you to lighten your weekend in case you're depressed by my seeming pessimism about markets.

A young man named Gordon from Fife bought a donkey from an old farmer for £100. The farmer agreed to deliver the donkey the next day.
When the farmer drove up the next day, he said, "Sorry son, but I have some bad news...the donkey is on my truck, but he's dead."
Gordon replied, "Well then, just give me my money back."
The farmer said, "I can't do that I'm afraid - I've already spent it."
Gordon said, "OK then, just unload the donkey anyway".
The farmer asked, "What are you going to do with him?"
Gordon said, "I'm going to raffle him."
To which the farmer exclaimed, "You can't raffle off a dead donkey!"
But Gordon , with a big smile on his face, said "Sure I can. Watch me. I just won't tell anybody that he's dead."
A month later the farmer met up with Gordon and asked, "What happened with that dead donkey?"
Gordon said, "I raffled him off. I sold 500 tickets at £2 a time."
Totally amazed, the farmer asked, "Didn't anyone complain that you had stolen their money because you lied about the donkey being dead?"
And Gordon replied, "The only guy who found out about the donkey being dead was the raffle winner, when he came to claim his prize. So I gave him his £2 back plus £200 extra, which is double the going value of a donkey, so he thought I was a great guy."
Gordon grew up and eventually became Chancellor of the Exchequer, and no matter how many times he lied nor how much money he stole from British voters, as long as he gave them back some of the stolen money some of the time, most of them kept thinking he was a great guy.

A couple of charts this weekend - Easyjet shows how the chart gave prior warning of an impending fall, which I'm showing just to reinforce my ongoing point that we should try to 'trade what we see' and also to consider what to do with a stop loss when there's a gap.

Northgate Information Solutions Plc seems to show a very nice example of a 'down channel' within an overall uptrend - see what you think.

Finally this weekend, please note that the WICS password will change next Friday 14th April - just continue to use the current one till it no longer gives you access. I'll have sent the new one to everyone entitled, well before the 14th, and those of you whose subscription will expire on that date, have already been emailed with a renewal reminder. If you decide not to continue to suffer my weekly ramblings, I won't be at all offended, and I wish you well in your trading career - I just hope TTEW and WICS has been of some benefit to you overall!

All the best,

Ian.

PS: if you're not going to continue with WICS, keep an eye on the major European markets for the inevitable drop below the low of 8th March 2006 - that will be the first major indication of the 'big drop' beginning - and remember too that if you ever want to resubscribe, you will be welcomed back without hesitation - all donations to my retirement fund are gratefully accepted!

Oh yes, and have a look at MyTravel Group Plc - why? Because of the big change in volume since April 2005, directors' dealings, and some resistance developing as the price slowly (very slowly!) comes out of the doldrums. What are the chances of an upside breakout? I don't know yet, but would Sir Tom Farmer (ex Kwik Fit etc) have spent £1.15m of his own hard earned cash last July to watch the company go bust? Hmmm, I keep asking myself such difficult questions!

IW.

.'IMPORTANT NOTICE: These WICS charts are for EDUCATIONAL PURPOSES ONLY. They represent only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should they be construed as recommendations to trade. If I choose to trade what I see, that is MY decision. YOU must, in turn, come to YOUR OWN conclusions about what action, if any, YOU might choose to take'.