“We are more convinced than ever before that we are about to drop like a stone starting next week.” 

EPIC Sell-Signal Cluster 

“Getting back to stocks, I want to reiterate that the BAM model has a current set-up calling for a tremendous straight-line decline.  The reason I’ve been so adamant about the nature of this decline off the top (straight-line as opposed to a rounding top) is that never before in my work have I seen such a large number of sell signals (in a variety of time frame models) all ready to trigger simultaneously.  A straight-line decline is very rare coming directly off a new all-time high but that’s exactly what I’m calling for.  (Look back at the February decline and double it in brutality if you want to get an idea of what I’m expecting to kick off this bear trend.) 

I believe one of the best attributes of the BAM Model is its ability to highlight periods during which dynamic price spikes—both up and down—are likely to unfold.  The absolute movement of markets–whether we’re talking about stocks, bonds, or crude oil and wheat–seems to me to be much less dangerous to bulls or bears (caught on the wrong side) than the actual velocity of price movement.  Slow moving markets, no matter how extreme the absolute price move, somehow allow funds the ability to adjust hedges accordingly in order to avert disasters.  But when violent moves throw volatility out of the parameters of their comfort bands, all hell seems to break loose.  I have no idea if the quant models are feeding the portfolio managers certain price velocity parameters based on historical studies, but my money says they’ve got it wrong again and that some heavy-footed hot-shot (in addition to Bear Sterns) is about to wrap their portfolio around a tree.” 

NOTE:  The stock market topped the following day on July 17 with an intraday high of 14,021.95 and after holding fairly steady that week, plunged to 13,265 the next week as forecasted (a 756 pt free-fall).  After a mini-bounce, a second even more severe free-fall took place down to the 12,517 level at which point the FOMC stepped in and stopped the crash. Quant funds were blamed for the sharp “unexpected” sell-off as the INDU declined 1500 pts over 23 sessions for a 12% decline off the BAM model’s sell signal high.

Full report coming soon