Monthly Archives: December 2008

VOLATILITY

The question of what the FED will or will not do is irrelevant according to my work.  The market is ready to sell-off and the catalyst could be any flavor of the day from the FED cutting too little or too much.  In fact, it could even be some totally unrelated topic. 

Bottom-line…the volatility model says volatility will spike today into 10:35 and then continue to rip to the upside into 12-18.  THIS IS A VERY POWERFUL SET-UP, so look for a nasty plunge in the stock market with MUCH higher premiums on the options that are due to expire this Friday!

According to the BAM model, today should mark the start of an upside explosion in volatility and another wave of selling that will continue through the end of this year.

The model has been spot-on this entire year and from a business perspective there’s certainly no reason for me to remain bearish with the market back at the 2002 lows–I could simply pack it in a claim better performance than my competitors–but that would be a disservice to subscribers and it doesn’t reflect a discipline of strictly following the BAM model.

No change–INDU 6426 target this month and if that level breaks they could trade to 3971 into mid February.

Full report coming soon

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BAM VELOCITY INDICATOR

The BAM-VI (velocity indicator) buy level remains negative but at least it’s now a -500 buy signal on the INDU.  The sell signal level however, has dropped all the way down to 15,500 (which is the lowest sell signal number in many, many months.)  What this is telling us, is that even if the market can rally on FED induced news between tomorrow and year-end (I don’t see that in my work) they should run into resistance very quickly and come right back down to make new lows early 2009.

The hourly model shows a violent set up with BOTH buy and sell signals set up and ready to trigger so although the intraday model says we’re headed lower (as does the hourly model) this should prove to be a violent thrashing move lower within a larger trading range as we decline.

When we come out of this low, the model is calling for a stampede to the upside (into March) but that shouldn’t occur until after the FEBRUARY 17-19ish period at which point the INDU might even be trading at 3971 if it can’t hold that 6606 magnet and that 6426 Fibonacci number.

I was probably the most bearish forecaster on the planet when the market was topping into October 2007 at the 14,198 level (at which time I was publishing a forecast of INDU 6606 during 2008), but the fact that I’m now talking about that 3971 target–which was, and is, a 2011-2015 BAM target–is amazing even me.

This sounds insane, but so did a crude crash to 47-36 when it was trading at 147 (and GS said it would trade to 200) but if they actually trade down to 3971 during February of 2009, I’m afraid I’ll have to start talking about INDU 1580 and even 480 into 2012-2015. 

These are disgusting number, but the greed and arrogance that led to 100x leverage and the writing of derivatives with nothing to back them is something the world has never seen before and it’s common sense that a decline after those types of mistakes is guaranteed to over-shoot on the downside. 

Full report coming soon

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DOWNSIDE SPX TARGET REMAINS AT 680

It looks to me like we can expect the INDU to be trading down to at least 8300 (a new magnet created today) on Sunday or at the open on Monday. 

Every single person I read about seems to be saying the bottom is in place so it’s not surprising that they’re going to be stubborn here but, mark my words, when they run out of bullets–and the market has only treaded water–they’re going to realize that they screwed up and this thing is going to crash again. 

The perma-bulls (they are buried by 50-70%) are still saying to buy, and now even long-time bears like David Tice, Doug Kass, and Bill Fleckenstien have either respectively sold their funds, flipped to the bull side or left the table with their pocket’s full of cash.  In other words, even without the advantage of my model, I don’t see a lot of evidence of any type of washout whatsoever.  The fact that even these bears are in essence picking a bottom, tells me there’s a lot more to be had on the downside. 

Two important developments today and BOTH of them were created due to the market’s stubbornness up here.  The model always has a “pay me now or pay me later” approach with regard to its forecasts and if they want to be stubborn one day, they pay dearly for it the down the road.  That’s just the nature of its mechanics. 

Anyway,  the model says we’re going to continue to crash into Feb and April of 2009 and the long-standing target for 2011-2015 (3971) just moved up into the February 2009 to April 2009 time slot.  I NEVER would have guessed this would happen but we can thank the FED and Treasury because they’re the ones who created the complacency that will be the catalyst that takes us down in a series of crashes into early next year. 

The targets for 2008 remain INDU 6426 and SPX 680 but–again because of the stubbornness of the market–it’s now possible that we’ll see at least an intraday print at DOW 4800. 

Happy weekend…

Full report coming soon

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CURRENCY PAIR-USDJPY

The USDJPY model says that currency pair is about to get hit again here today so I’d be expecting to see it attack the low into about 10:15ish. 

As for stocks…the currency weakness in the US dollar shook them up last night but the dollar bounce, after the opening bell this morning, today took them right back up again. 

It looks as if the stock market is joined at the hip with the dollar today and especially with this currency “pair” of the dollar against the Yen. 

My hunch is that we’re about to see the dollar break down to a new low on the year today and with that move, the stock market will resume it’s crash leg. 

We’re just coming into the first nasty zone of weakness here for stocks (into 9:45-10:15am PST) so they should roll back over and start the downside acceleration. 

The overnight model has a bearish “reset” at its low this morning just prior to the opening bell so that model is assuring me that we’re still on the correct side with our expectation of a breakdown as opposed to a breakout (which is what all these bulls are positioned for) 

 Sell signals triggering all over the place so once the roll over resumes this one should be similar to that day when we saw the mkt. drop 400 points in 12 minutes.  I’m not saying that will happen right off this high this morning…but at some point between today and 12-16, we should see a move that is even more intense than the down 400 in 12 minutes. 

We should see the 839 SPX magnet today so that would represent over a 60 pt SPX drop and that would get their attention.

Full report coming soon

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INDU Target and SKF Commentary

Also remember that the BAM model’s absurd target for 2008 (of 6426) isn’t quite as absurd anymore with that 11-21 intraday low sitting at the 7449 level.

Velocity is off the chart, the 11-21 low was an incomplete low according to the BAM model’s bottoming count, and the zones of weakness indicate a “bear cluster” today and Monday so it looks to me like the Citi bail-out is going to prove to be the shortest lived FED-induced bounce yet…

If I want to be conservative, I say SPX 710 into 12-10/12-12 and the crash numbers are stupid looking so let’s skip them.  Bottom-line…if they crash, we’re involved.

The SKF is one of the best “tells” in my work right now because it says the financials will have another melt down (near-death) experience very soon.  That index left behind an INCOMPLETE topping sequence into that 303 high on 11-21 and that implies they’re heading back up through that level again at some point in the near future! 

Assuming the SKF tracks the BAM intraday model…that implies a gain of OVER 120% off today’s closing level of 137 and it also implies a MAJOR blow-up of one or more of the financials.

Full report coming soon

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CRUDE OIL

When crude was trading at 147 the model identified it as a huge bubble ready to pop and we issued a target of 57 into as early as September 2008 with an ultimate target of 36-47 dollars into the first quarter of 2009.  (We spent about three weeks in a padded room after that call but have officially handed the room key over to the guys who forecasted 200-300 dollar crude based on global demand and blah, blah, blah…)

Anyway, we’ve seen the 47 target reached now and the model looks bearish into 12-22ish so, believe it or not, I think we can actually trade to 36 dollars this month!

Bigger-picture it doesn’t matter but we’re definitely going to have to adjust the ultimate target down to about 19 dollars over the coming three years as we fall deeper into what appears to be a global economic depression.  Sorry, I’m just the messenger.

Remain LONG the DUG as it should trade back above the year’s highs as early as year-end or Jan 2009.  Notice that the DUG is closer to all-time lows than all-time highs BUT crude is closer to multi-year lows than multi-year highs!  Somebody is DEAD-wrong here, and the model says the bottom-fishers in the energy stocks are the ones who are wrong. 

Look for a tremendous puking of all energy stocks between today and year-end. 

RIMM 

The model has been short RIMM for a very long time (in fact we were SEVERELY buried in this name for many months) and when the stock was trading over 140, the model’s 15.74 target into 2008-2009 looked like an absolute joke. 

Today the stock trades at about 38 dollars and although 15.74 remains a distant target, we’ll remain short the stock (probably into 12-12 at least) to see how close they can take us to that mark.

A massive short-covering/buying stampede comes in this name after the new year (according to the model) so we’re running out of time on this crash leg and I’ll be keeping a close eye on the stock as I move closer to the exit door.

Full report coming soon

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