Why Finding The Catalyst Of A Market Crash Is Usually A Mystery

I want to start today’s discussion by updating our current view on world stock markets as well as the potential catalyst we think might play the most important roll in the coming crash.

Then we‘ll talk a little bit about the nature of important market turning points and how we manage our own emotions during periods of “high emotion.”

The BAM Model is currently predicting a stock market crash of approximately 22% during the month of October.  Unfortunately, after the initial crash, we’re also expecting several mini-crashes during the coming months as the SPX moves back down toward our long-standing target at the SPX 529 level.


Why are we sharing this information with non paying subscribers?

Simple.  We want to help people.

We also know that once we save/make you money that you’ll become a life-long enthusiast of behavioral analysis and a paying subscriber to one of our BAM Investor products.

The current stock market TOP (as all important turning points) has generated a lot of questions from followers, most of which are fairly typical.  The questions range from earnings related to more pointed insults–telling us things I can’t repeat here–but the main take-away is to understand that these are normal reactions, all of which we’ve witnessed before at major turning points.

This crash, as all crashes, will be based on a surprise factor and for that reason, it’s more difficult to answer questions based on fundamentals than it is to simply say that our model has been very accurate in forecasting both market melt-ups–like the ones we identified in wheat, gold and crude oil– as well as crashes–like the ones we forecast in the stock market and crude oil during 2008.

Our model is a little mysterious (even to us) in that we’re never sure what the catalyst might be for a big market move.

All we can be certain of is that our model is calling for the move and that, historically, the model has made many unexpected market calls that were very profitable.  In other words, we listen to the model even if we can’t figure out the reason it’s telling us what it’s telling us and we NEVER attempt to outsmart the model.

We’ve been fairly accurate over the years in analyzing intra-market relationship as a method for focusing on the most likely catalysts for large market moves.  In other words, if one market moves rapidly is it likely to create a fast-market move in another market.

The current crash, assuming it follows our script here, will most likely be tied to the fact that so many large funds have placed trades originating through a US Dollar-based Carry Trade.

What that implies, is that once the US dollar Index starts to rally sharply–and we think that will occur this week–the simple “mechanical” unwinding of these trades will be sufficient to cause bull markets to collapse while simultaneously causing bear markets to sky-rocket.  By “mechanical” we simply mean that market participants need not want to buy or sell for fundamental or personal preference reasons, they’ll eventually be forced to buy or sell during the unwinding phase.

Simply stated, we believe the pressure being applied to large hedge fund operators to generate market-beating results, has placed world markets in a precarious position of trading off the exact same catalyst which in turn creates a situation whereby markets– no matter how apparently diverse– are in reality joined at the hip.

Please remember that it’s typical for BAM Model followers to feel “wrong” at major turning points, after all most other services rely on trend following techniques as opposed to the market timing and contrarian investing discipline that our model forces us to follow.

Believe me, it’s difficult for even the most seasoned hedge fund operators to follow our work blindly so we certainly expect individuals to severely doubt us at important turning points.   But if you stick with us long enough, your comfort level will increase with each correct market timing call the model makes.

As a rule, if you’re uncomfortable to the point of losing sleep or thinking about our forecasts too much during the day, you’re probably gambling as opposed to investing.  Traders and speculators may wish to gamble in a controlled manner but it’s never a good ideas for investors.

Also please remember that what we do here on this site is intended to simply provide a “peek behind the curtain” with respect to our own personal portfolio positions as well as the positions we’re sharing with institutional investors and hedge funds.

If you follow any of what we’re doing here on this site, please be aware that you’re doing so at your own risk.  JG Savoldi, his family members and friends, are involved in trading ideas and portfolio positions mentioned on this website.  In other words, we’re walking the talk here with respect to the BAM Model.

Thank you again for your interest in the BAM Model.


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