Last Friday, as the market was crushed into the close, we told clients to expect a continuation of the move on Monday but that it would trigger a capitulation buy signal in our work. We also said in last week’s report to expect a sharp bounce on 10-22 and 10-23 possibly extending into early morning on 10-24. Then, once we saw the 10-23 close, we said to expect a gap down open on 10-24 followed by a little early morning strength followed by a cascade to new lows on the week. Well, all of those forecasts came to fruition into the 10-24 early morning low but at that point buyers stepped in and the market inverted for the remainder of the week into the strong close on Friday.
Friday, Most Bearish Day of the Entire Year According to Model
On Friday October 26, the BAM model came into the session extremely bearish and calling for “relentless selling” and after a gap open to the upside, the market perfectly followed the models forecast for a steady downside drift. But just as the market was entering what, according to the model, should have been a period of downside acceleration, the market became unhinged from the model and inverted throughout the remainder of the day closing right at its highs.
Moving into the end of the day, we emailed clients warning them that the market, as it inverted to the upside, was pushing into “the most powerful sell signals of the entire year” and we then also emailed again to let clients know that we were triggering sell signals not only in the BAM model but also in our proprietary velocity model (an entirely separate tool). After the market closed we were able to update other longer-term velocity models and they too were providing the exact same picture—screaming sell signals!
NOTE: On November 1 the market went into free-fall led again by TECH.
Full report coming soon