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