I’ve decided to post a series of what I consider to be the most frightening charts I’ve ever tracked in real-time.
Chart work in and of itself is not what concerns me as I place very little faith in pure “technicals” but when I consider what these charts might be telling me along with what the BAM model is most certainly telling me…well, lets just say I hope I’m wrong.
The primary speedline I’ve been tracking since the market topped back in October of 2007 (shown as the black dotted line in the first chart below) told me way back when it formed (during the initial decline phase off that October top) that this decline was going to have crash characteristics i.e. a very steep trajectory during bearish periods and very high downside price velocity.
The previous crash set ups I’ve warned about this year were quickly halted through FED intervention but it looks to me like we’re all going to pay a HUGE price for those interventions. The past crash set ups were pretty nasty—in the range of 10-17%–but the crash set up I’m tracking now is an unequivocal MONSTER with 50% risk in the EMINI FUTS Daily model according to my speedline study.
I warned a banking analyst/portfolio manager back in 2005 that my AIG model looked like a complete disaster and that I expected it to trade down to single digits over the coming years…and he laughed at me. Nothing is impossible, especially given many portfolio managers’ apparent propensity toward gambling with other people’s money. Derivatives expose all stocks and indexes to unknown risk and with the insane amount of leverage being used they are a recipe for disaster.
I’m assuming we’ll see INDU 6606/6565 within the coming weeks and I just hope it’s not worse…
Full report coming soon