Monthly Archives: July 2009

HGX Commentary

Back in May I told you all that the HGX Index was the most bearish index on the board and that I thought it was ironic that the index that started the entire 2007-2008 debacle looked as if it would be the first back through the March lows.

 Shortly after that bear call, the HGX gave-back a full 50% of the gains (off the March lows) but it then generated some unexpected bullish near-term data so I told you all to “cover home builder shorts.”

 That idea worked out as the HGX went verticle last week and individual stocks blasted 30-40% higher in 4-6 sessions but the HGX is now bearish again and I want to put back out all home builder shorts. (HGX currently at 93.72)

 The model expects a severe plunge in the HGX into 7-30 near-term and I’ll update after that.

 I’m not trying to trade these things but, like I said, assuming the market tracks the BAM Model–this is going to be a wild summer.




The stock market continues to track the BAM Model as they chop lower toward the SPX 864 magnet.  I am expecting a sharp–but very short lived–bounce to unfold once they tap 864 but I’m also expecting them to fall apart after about 7:30am PST on Monday morning regardless of any counter-trend bounce and regardless of the level they’re trading at when we move into that time period.    

Crude continues to track the model as well and it ironic to me that the model seems to be telling us we’re about to repeat the 2008 experience with crude crashing, the HGX plunging to new all-time lows, and stocks breaking loose on the downside. 

I was wrong about the violent moves I forecast in June but as most of you know, my model is strict in its rule regarding the “pay me now or pay me later” dynamic.  In other words–this not the time to become complacent.

I hear people talking about a “quiet summer” with “range-bound” trading and I couldn’t disagree more.

Full report coming soon



I would not normally send this email to BAMinvestor subscribers but since you all are helping us with the Beta I thought I’d provide a “heads up.”

I track many indexes around the world and that allows me to help clients avoid the pitfalls of what some modern day portfolio managers are espousing as “diversification.”

The BAM model is telling me that foreign market stock participation is NOT a good method for achieving diversification.  China, in particular, looks like it will track the US stock market lower over the coming months and the BAM Model is warning me that it might even crash.

I track the FXI for my hedge fund clients (the FXI is an exchange traded fund that mimics stock index exposure to China) and that model is currently very bearish.  In fact, I just issued a “crash alert” for China Indexes and that alert will remain in effect into the first week of September.

Complacency is running high (people are too bullish or at least not at all concerned about any meaningful decline this summer) and that places the market in a very dangerous condition.

Hedge funds are driving price action in the markets these days and because they’re forced to perform week in and week out, they have to be considered “fast money” or “hot money” meaning that they’ll move into and out of positions very quickly and in large size (volume).  What that means to you as individual investors, is that you should expect large, violent price swings and that you should avoid a “buy and hold” strategy for the remainder of this year.

I suspect that the government will, at some point in the future, change the rules and sideline the hot money, but for the time being we have to understand the new dynamic and play by their rules if we want to survive and profit.  In fact, my advice to anyone not interested in actively managing their money is to sit on the sidelines until 2016. 

If, on the other hand, you’re interested in taking advantage of what I think will prove to be the greatest profit opportunity of a lifetime, feel free to ask questions while you watch the BAM model perform over the coming months.

Full report coming soon


Crude Oil Update:

As you’ll recall, we told you all back on 6-11 that the BAM crude oil model was “as extended and overbought as it was at the 147 all-time high.”  We also said that “we expected what most investors seemed unprepared for, i.e. a crash in crude oil as well as the crude sector stocks during the summer.”  (Our shorts are focused in the XOI and we’re long the DUG) 

That said, if crude slips under the 62 level and begins accelerating to the downside, we should see crude trade into an “air-pocket” creating an immediate plunge to the 53.50 level this week. 

Crude will remain bearish in our work into Q1 2010 and we’ll stick with our 23-25 dollar target.

Full report coming soon



Our BMP (BAM Model Portfolio) is off to a great start in July as the S&P 500 sells off sharply today, led by the energy and financial sectors. (both bearish focus sectors in our choice of ETF’s)

Normally, you won’t see intraday commentary coming from me (because that level of service is reserved for my hedge fund clients) but when I see a key opportunity to teach you all a little more about behavioral analysis or the BAM Model, I’ll be exploiting that opportunity.

As subscribers become more familiar with the BAM Model and its nuances, you’ll begin to understand what my hedge fund clients already know.

The BAM Model is unlike any other forecasting service when it comes to controversial predictions–especially when related to seasonality, cycles, and other widely understood Wall Street “norms”–and because of that, we never pay any attention to cycle studies, historical trading trends, or even “The Super Bowl Indicator.”

Today is a good example of what makes us “different” (and what I believe adds significant value to clients and subscribers) because pre-holiday trading sessions are typically bullish and as a result, forecasting services are typically bullish.  It’s simply a fact that most forecasting services either default to a bullish stance or choose the even more weasel-like route of a “neutral” call on trading sessions just prior to a holiday break.

The BAM Model, on the other hand, makes predictions based strictly on the behavioral analysis of the human beings trading the market.

That said, today is a perfect example of the model acting in a very contrarian manner as we came into the session EXTREMELY bearish—as displayed by the positions in our BMP (BAM Model Portfolio)—and have been well rewarded by the worst pre forth of July trading session in the last one-hundred years.

Full report coming soon