Monthly Archives: February 2009

EXPECTING MARKET LOW FIRST WEEK OF MARCH

The market is tracking the model again today as they snap-back down into this important SPX 757 magnet.

Sell signals are set up overhead today so that tells me rallies will fail and that provides a good opportunity to get shorter if that’s your intention. 

If you do want to get a little shorter and if we do get a bounce up off this 757 magnet, I’d suggest looking for a bounce to the SPX 764 level (which is a newly created intraday magnet established yesterday).

Everyone seems to be focused on the SPX 741 level but remember that that level is insignificant AND WILL FAIL BETWEEN TODAY AND 3-5 according to my model.  What’s interesting though is that the BAM model will be anticipating a fast-market move between the 757 and 680 magnets so I would guess that fast-market move will be blamed (by the talking heads) on the fact that the “critical SPX 741 level broke.

The prefect scenario in my work is a fast market move down to SPX 680 between today and 3-5 followed by a rocket-ship short-covering/buying stampede into March 23rd. 

I have good news on the potential bullish bottom we’re looking for!  My proprietary BAM TRIN model is showing an upside spike in the TRIN (selling pressure) into March 5 so, once again, we have data showing the potential for a capitulation low during the first week of March.

The fact that so many analysts have recently come public calling “the bottom” a few days ago (on 2-23) adds even more credibility to the idea that stocks need to cascade through the November SPX lows into the first week of March.

We WILL be buying (possibly with both hands) if stocks can make lower lows into March 4, 5 though so continue to put your buying lists together.

Remember, the most bearish group I’m currently following is the (on-line) education group and the BAM model expects those stocks to get annihilated into mid-to-late March.

Full report coming soon

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MONTHLY RSI MOST OVERSOLD IN HISTORY

I never use this type of indicator as an absolute trigger for buying or selling–but I think it’s worth mentioning.

Keep in mind that this can change if the INDU can rally into the end of February (because the February monthly bar will not close until this month ends) but as of now, the DOW Industrials are more oversold (on a monthly basis) than at any other time in history according to my work.

The previous lowest monthly RSI readings were in June 1932 (the market bottomed in July 1932) and September 1974 (the market bottomed in December of 1974).

This type of oversold reading in the monthly charts is epic and leads to screaming rallies when they turn back up but keep in mind that they never allowed the daily RSI to work itself into an extreme oversold condition in my work, so we still need to remain alert for a crash as we attempt to bottom-fish this nasty bear.

I also hate the fact that there seems to be so many other bottom fishers out there right now but the BAM model has the advantage of updating every minute of everyday and that should keep us from getting buried even if I suddenly get an indication that they’re going to crash this thing as they wind down this first leg down.

Full report coming soon

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BAM MAGNETS AT SPX 757 AND 680

The stock market continues to track the BAM model (and we’re making nice money in the model portfolio as well) so the model is off to another good start in 09.

First the bottom-line, then if you’re interested in details–read further.

It looks like they’re finally going to open down into our INDU 7370 target (or lower) so let’s focus on the SPX 757 magnet today.

-weakness into 6:45am PST
-bounce into 7:00am PST
-weakness into 8:30am PST

-Look for a low very early this morning (first 15 mins?) followed by a bounce into about 7:00am PST, followed by a further sell-off into about 8:30am PST
-Lower lows are needed after that early morning low but that low (assuming they continue to track the model) will represent only a 1 minute model trading low.
-Lower lows later today or next week but expect MUCH LARGER COUNTER-TREND BOUNCES WITHIN THE CONTINUED DOWNTREND BETWEEN TODAY AND THE FIRST WEEK OF MARCH. 
-If you focus on that SPX 757 magnet that should provide key information about when this market is going to collapse because we’ll wobble around 757 for hours and then that mark should start to create resistance just prior to the plunge to 680. 

Details-

Two weeks ago we had the perfect set up for the stock market to plunge back through and November lows, finish the BAM bottoming sequence, and begin the inevitable bear market rally we see ahead.  The bottom pickers, unfortunately, blew that for all of us and as a result, things are a bit more complex looking. 

Here’s what I see as I work my way through all of the various fractal (time frame) models-

-1 minute model-They’re going to bottom in the very short-term 1 minute model this morning on a down open and we should see a 50-100 pt counter-trend bounce. (think of this model as mini bull and bear markets that the market is constantly running through every 1-3 sessions.)

-5 minute model-They’re finally back through the November lows (which the model told us needed to be done) and they’re working their way through a bottoming count, but are NOT there yet and will not be complete if the market turns higher after a down open (this is typical as the 1 minute model can run through multiple “mini” bull and bear markets, up and down, as the 5 minute model is only registering a single bull or bear sequence over a 3-7 session period.)

-hourly model- This is the model that contains powerful BUY signals (but it requires weakness to trigger them) and these are the signals that will create the “V” bottom I’m expecting as soon as the 5 minute and 1 minute models complete bottoming sequences SIMULTANEOUSLY.  My best guess concerning the important intermediate term low is that it will come on or around 2-26.

Please keep in mind that we used to use the 5 and 1 minute models for day trading and the hourly, daily, weekly, and monthly models for investors and funds.  But that all changed when the market began trading in 100-700 point daily ranges (because the market volatility, that the BAM model warned us was coming, created a situation whereby the market was moving up to 155 pts within a single 5 minute topping or bottoming sequence.)

My job now is much harder, not because the market is harder to predict direction-wise, but because it’s harder for me to not over-load investors and fund managers with information as I attempt to ignore wiggles while at the same time warning them about coming 3-5% “bounces” within the larger downtrend. 

The market is, in essence, forcing all of us to become day-traders and this is especially true if you have to worry about weekly performance numbers as opposed to be scrutinized only on a monthly basis.

Full report coming soon

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“V” BOTTOM IS COMING

Before getting into today’s forecast, I want to let everyone know that yesterday’s upside price spike should be viewed as a “shot across the bow” with respect to the coming mini melt-up the model is forecasting.  I did warn you all about a “sharp bounce” (and forecast that in yesterday morning’s update) but I didn’t expect it to be quite so violent. 

Remember though, the low, once it comes (I think we’ll see it either Sunday in the futures mkt. or next Tuesday during the day session) should be a “V” bottom just like the one we saw yesterday.

This implies that if you’re bullish certain individual stocks–and won’t lose sleep if they move against you a bit–you should be buying those select names on weakness today and the first session of next week because, according to my model, this set up will be very forgiving in that even if you buy at a terrible price today and Tuesday, they should be right back at your buy level or above within 2-3 sessions.  (This of course assumes you’ll be buying market performers that move with the averages)

Here’s what I’m watching-

There are certain thresholds in my work that are coincident with buy and sell programs and high-emotion, high-velocity moves, and the market’s current set-up finds it sitting directly on top of just such a set-up. (Call it the ultimate cruel whip-saw set up)

What’s interesting about this set-up is that the news backdrop is such that the talking heads are all guessing whether or not the news from our gov. is likely to elicit a positive or negative response once “the news” becomes more clear (i.e. details are released.)

The BAM model says just the opposite.  The BAM model says that the emotional backdrop of participants is what determines market direction because it is that emotional backdrop or “mood” that determines the reaction to the news regardless of the actual news.  This, I believe, is the reason you often see counter-intuitive reactions to crude oil inventories reports, earnings reports, etc. etc. and this is also a part of the theory behind the “buy the rumor, sell the news” or “sell the rumor”, “buy the news” dynamic.

Anyway, the BAM model–after being more negative than any other forecaster I know of over the past two years–is warning me that market participants are ready to move from an emotional backdrop of severe pessimism to an emotional backdrop of optimism and as they do that the market should rally regardless of–and even despite–the “news.”

Full report coming soon

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