The market topped at the open today as expected and then declined to lower lows on the year as expected but they’re wobbling around what the talking heads are calling “important support at the SPX 700 level” as opposed to accelerating down toward the BAM 680 magnet. I don’t think this will last much longer but it’s fairly unimportant as we should see that 680 magnet soon enough.
The more important subject we need to focus on is when/if the SPX 680 magnet will break, creating a crash leg in stocks.
I know this is the most unlikely call yet (a crash after the market has already declined over 50% without a large counter-trend bounce) but the BAM model follows minute-by-minute data and the message is clear. We need to prepare for a crash starting as early as 3-5.
3-5, not 3-4 as I had mistakenly said earlier, is the session that shows both a breakout in the volatility indexes (showing elevated emotion) as well as a breakout in the important TRIN model (showing elevated selling pressure) and IF the market tracks those two important models AND begins to expand volume in the indexes, we have a crash on our hands.
Adding to this bearish backdrop is the HUGE air-pocket that formed in the Nasdaq–as bottom-fishers moved that index in a sideway range since that November low–as well as the SPX “BAM speedline” which is colliding with the BAM 527 magnet this week and next.
My best guess (as I drill-down to the 1 minute intraday model) is for a move to 680 followed by a very short-lived, sharp bounce, followed by a crash beginning on 3-5 and accelerating toward SPX 527 into March 9,10.
This is like watching a horror movie but instead of watching the knucklehead open the closest door (that the monster’s hiding behind) I’m watching these bottom-fishers buy this “magical” SPX 700 level and by doing so they’re creating additional sell signals.
Every time they bottom-fish, they generate NEW bearish data and sell signal set-ups (that they have to deal with hours or days later) in my model.
I know the number of down days seems unlikely (and I agree) but based on the model, they just keep digging the hole deeper and deeper.
I really can’t imagine a scenario where they escape from this without crashing on March 5 and 6 but we’ll see.
No change. Hang on tight to those ultra-bear positions and shorts.
Tomorrow shows sell signals overhead and the only window of strength I see is into 9-10:00am PST, so after they pass through that bounce window (no matter what level they’re at) the bottom should drop-out.
Full report coming soon