-The stock market tracked the BAM model well last week as stocks suffered their biggest three day decline in five years with the NDX plunging in a “straight-line decline” to the 2056 magnet level just as anticipated. But now, just as investors probably think it can’t get much worse, it has.
-Lets start by reiterating the bigger-picture BAM stock market forecast which points to a brutal 58% bear market decline into 2010 with the SPX round-tripping the entire 2002-2007 bull run before finding support into the SPX 680 level.
That’s right, regardless of election year cycles, the Olympics in China, emerging market strength, a possible interest rate easing cycle etc. etc. etc. our model is unequivocally ultra-bearish over the coming few years in fact it most closely resembles the set up we had during the 1929-1932 period.
During the 1929-1932 period—to dissect it a bit for you—started with a crash followed by a large bounce followed by a variation of mini-crashes and long grinding declines. No two periods are exactly the same, but as I take a step back and look at our stock model, it has a very similar set of sell signals, future periods of weakness etc. as did the 1929-1932 period. In fact, the only real difference between the 1929 through 1932 period is that the current set up actually looks MORE bearish in our work. Maybe that’s impossible, and maybe it’s not but let’s just say I can honesty tell you all that this is the first time I’ve ever hoped our model is 100% wrong.
Individual Price Targets Also Confirming Model’s Bearishness
When we first started talking about the enormous real estate bubble in 2005, the BAM model was giving us what appeared to be absurdly low price targets for stocks like HOV, DHI, BZH, KBH, and TOL during what we thought at the time would be a huge real estate collapse into 2009. Well, those absurdly low price levels now seem believable—because we’ve already reached most of them—and we’re now ready to talk about some equally absurd price levels we think other stocks will see on either a crash leg or over time during the next several years. This is just a small very random sampling but it should serve to illustrate what we see coming.
GM-6.00, possibly even 2.50, into 2009
RIMM-48.75-crash leg, 24.00 into 2009
FSLR-120 crash leg, 52 during 2008
GS-70 into 2009
GOOG-293 into 2008
BIDU-187 into 2008
LM-23 possible on crash leg or into 2008
…Now let’s take a look at the results of the above predictions:
GM-6.00, possibly even 2.50, into 2009 (30 at report date, went bankrupt)
RIMM-48.75-crash leg, 24.00 into 2009 (102.60 at report date, crashed to 35.05)
FSLR-120 crash leg, 52 during 2008 (177.70 at report date, crashed to 85.28)
GS-70 into 2009 (214.71 at report date, crashed to 47.41 and was saved by bailout)
GOOG-293 into 2008 (632.07 at report date, crashed to 247.30)
BIDU-187 into 2008 (310.50 at report date, crashed to 100)
LM-23 possible on crash leg or into 2008 (72.86 at report date, crashed to 10.35)