Monthly Archives: April 2009

Velocity Indicator

As I look at all of the various BAM Model sell signals–as well as the BAM-VI (velocity indicator) sell signal–and then take into account the incredible extension in the counter-trend topping sequences, this move in stocks looks most similar to the move in crude oil as it topped into that 147 level before immediately collapsing.

Most of you will remember the model warning us that that crude oil move would be followed by an “immediate collapse” and although they pushed farther than I had anticipated, (and yes it had a manipulative look to me) we did see the collapse the model was looking for with both time and amplitude matching the model’s call.

You’ll also remember how controversial that call was as quite a few firms were calling for 200-300 dollar oil while the BAM model was calling for “87.50 into September, followed by a further collapse to 36.”  Keep in mind that crude oil was at 147 in July so that meant the model was calling for a move from 147 to 87 in two months! 

Anyway, most thought I was insane during that call (I don’t “call” anything, I just pass along what the model is telling me) but, somehow, it worked out.

My point is that the BAM Model is calling this move in stocks “incorrect” (starting about March 23rd when Geithner apparently moved the market) and it’s now warning us that all of this move above the 7571 level is “wrong” and that the market will unwind that advance with lightning speed (crash, mini-crash…whatever you want to call it) and that the market will THEN continue the (further) decline that refused to unfold back in March.

Bottom-line…new lows for the year are coming according to my work and the nature of the decline should be a crash leg.

Full report coming soon

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INVERSIONS EXPLAINED

As I said on Friday, the fact that a market inverts does NOT change the original forecast, eliminate downside targets, or raise them (according to the BAM model.)  In fact, what it does–according to my model–is create a situation in which the market is temporarily “wrong” in its direction as it levitates above an air-pocket–composed of the original advance or decline (which was supposed to have unfolded) PLUS the new advance or decline created by the inversion.  Using Friday as an example, the 119 pt advance will be unwound on a GAP (as we open this morning) and THEN we need to see them fall further in order to “make up for” the original decline.

Also, if you see the market stray from the model’s forecast, the model is instructing us to “fade the market” in expectation that, once the decline unfolds, it will make up for all past stubborness as the market experiences either a mini-crash or a full-blown crash.

As a reminder, I’m also expecting that “severe” decline in Crude Oil and that might fit the potential idea of a flight restriction/transportation scare related to this flu outbreak.

Full report coming soon

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