Monthly Archives: October 2007

SELL, SELL, SELL

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

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To Crash, or Not to Crash, That Is The Question…

Whether ‘tis nobler for the market to suffer the slings and arrows of the real estate bubble, or for the FOMC to take arms against a sea of foreclosures, and by cutting rates end them…ay, there’s the rub.

The model says stocks are about to TANK, led by the NDX and the XBD.  Sell signals are of the “EPIC” category up here and we think the FOMC actually made the problem worse than it was before because we had record short interest going into the July/August decline (which meant we were likely to find solid support within another 5%-8% even if they had not stepped in) but now, because of all the rate cut related short covering, we probably saw a significant number of shorts “go away” which means the FOMC actually REMOVED the protective cushion we had in place.  Bottom line is that we’re now ready to fall even faster and farther than before their intervention.  The market wasn’t even down 12%.  That’s like watching a guy drink three light beers and then carrying him into a room for an “intervention.”  Let’s just say “preemptive” is an understatement.

NOTE:  On October 11 the market went into free-fall led by the NDX.  The sudden decline in tech stocks was said to be “unexpected and a great buying opportunity.”  The majority of high-fliers were down over 20-30% shortly after this report was mailed to clients. 

Full report coming soon

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