The XBD just gave-back over 10% of recent gains, and while those gains required 51 mkt. hrs. to unfold, they were lost in a mere 16 mkt. hrs!  That is what I call downside velocity and I believe it’s proof positive that the XBD INDEX is tracking the model here (as I warned you all a few days back that the model is predicting a broker related financial problem dead-ahead.) 

I’m purposely not following news but I think it would be well worth the effort for you all to sniff around a bit.  SOMETHING BIG IS COMING in this space according to the model and I would not hesitate to put on NEW shorts if I had not already been short this index the entire year. 

IN FACT, IF YOU HEAR A RUMOR OF AN IMPENDING IMPLOSION IN ONE OF THE XBD COMPONENTS…CHANCES ARE IT WILL TURN OUT TO BE TRUE. 

Combining all model time frames here’s what I see ahead— 

WEAKNESS into 8-21, 8-22, 8-26, (very bearish)
8-27/8-28 looks like a bounce
8-29 opens the trap door again into 9-26 and 10-15 (bearish periods in the hourly model) 

The model has been bearish and correct the XBD the entire year and the upcoming period looks more dangerous than anything I’ve seen so far so I would guess Bernanke and company will be severely tested over the coming weeks and regardless of what they come up with on the bail-out front I cannot imagine the XBD not trading down into the 2002 lows (A 40-60% DECLINE FROM CURRENT LEVELS) over the coming 8 weeks.  (SEE CHART)

Full report coming soon