BAM 864 MAGNET

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

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BAM CRASH ALERT-TROUBLE IN CHINA

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

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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

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BAM MODEL CORRECTLY CALLS WORST PRE FOURTH OF JULY IN HISTORY

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

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BAM 897 MAGNET

The SPX tapped the BAM 897 magnet (today’s low is 896.95 so far) and, as I said this morning, the model shows them turning back up. 

I would expect one more “fakeout” followed by a sharp rally and that rally, assuming the market tracks the model, should carry us higher. 

At that point, the SPX should be well positioned to trigger the hourly model sell signal that is waiting overhead (this trigger is NOT based on price, it is based on my proprietary indicator and I’ll let you know when it triggers) and once that sell signal is triggered this should get very, very nasty. 

Remember, the buy signal set up is strictly temporary and simply implies a sharp intraday rally.  It does NOT change the bigger-picture bearish forecast for a mini-crash in the Nasdaq to the 1427 magnet. 

Day traders may want to use a tight trailing stop on your FUTS short and if stopped, flip to the long side on an upside break of SPX 900. 

Crude Oil Update: 

Last Friday we wrote… 

“The downside reversal I see coming in crude oil can only be described as a CRASH.  We’ll see where the chips fall but, as far as my work is concerned, this call is 100% unambiguous–CRUDE OIL SHOULD CRASH IMMEDIATELY.” 

Crude is already down 8% since we sent that email and although I believe this move is confirmation of what the model sees coming, it looks to me like we’ll see one last bounce into the 70 level before a further collapse. 

If you are not already long the DUG, (our bearish crude and bearish XOI idea) I think we’ll see a nice opportunity involved.  Look for a quick bounce in crude as well as the SPX and if that opportunity presents itself–we will exploit it.

Full report coming soon

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BAM 944.75 MAGNET

Stocks are tracking the model this morning with a nasty downside reversal off the 944.75 magnet and I’m hopeful that we’re finally on our way. 

The first real “tell” comes IF they can get back under the BAM 897 magnet because that would tell us that 944 has “officially” failed. 

Remember, the theme for this June decline is supposed to be “total discombobulation” of many various markets and, assuming that’s correct, the talking heads will most likley blame the problems on unexpected US dollar strength. 

Our theory is that the dollar weakness brought over-leveraged positions into the “reflation trade” and that this unexpected dollar strength will create an unwind just as vicious as the unwind of the carry trade in 2008.

Full report coming soon

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HOME BUILDER INDEX NOW BEARISH

OK, here’s my final attempt to figure out what the various BAM models are telling me about the anticipated market-related discombobulations of June.

-The HGX is the single most bearish stock index in my work short term (into 6-15 through 6-19) and has been for many weeks.  It’s ironic that housing led us off the cliff and here we are again with a very bearish HGX model.  It makes sense if the bond/TLT models are correct though.

-The BKX is the most bullish looking stock index in my work but, short term, it is also bearish looking (into 6-15 which, coincidentally, seems to track the major averages as well as HGX)

-Crude Oil is the most bearish looking commodity in my work (although commods in genral look to get slammed) (we’re out of our GLD and SLV longs)

-The EURO is the most bearish looking major currency against the dollar

Recap of Intra-market Relationships:

-US Gov. Bonds down hard w/ TLT target of 86 minimum and 70-75 possible as rates spike higher

-US dollar spiking higher is a very short term (June), short-lived set up but the violence of the move looks to be disruptive.  (Longer-term my USD Model remains bearish with 65 target into Q1 2010)

-Housing stocks crumbling with a break of the March lows

-Bank stock Index (BKX) weakness into mid June (6-15ish) followed by a potential melt-up leg blow-off move into an August TOP followed by a crash leg.

Full report coming soon

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TARGET IS NASDAQ 1427 MAGNET

Yesterday’s forecast called for a 100-200 pt. decline and although the mkt. was fairly stubborn early in the session, we did see that forecast come to fruition later in the day. 

Bigger-picture.., we have a set up for severe weakness into the end of May/first week of June with a target of Nasdaq 1427 and I would expect us to be back through the March lows as early as the first week in July.

This is a very dangerous stock market set up and that means the market could crash at any time, but I’ve never seen a crash without a decent amount of warning in my intraday model (in other words all model time frames should match up and agree with the idea of a crash) so, if they’re going to crash, I think I can give you all a few days advance warning.

Bonds, USD, and Gold are tracking nicely but crude continues to levitate in what should become the “last gasp” prior to the realization that the economy is NOT coming back.

The BAM model says crude belongs down at the 25 dollar level (or below) into the first quarter of 2010 and I’m sticking with that call.

Full report coming soon

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Wheat Update

As you all know, I am more bullish wheat than any other commodity on the board (into 2018) and I expect a move to 1400 into the Fall of this year, however, the intraday model is topping and we’re due for a correction during June.  Let’s place a trailing stop at 572 basis July wheat and if we’re not stopped out and it moves higher early next week (as expected) we’ll exit into strength at higher levels.

Full report coming soon

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TRANS DOWN 14% OFF TOP

The stock market is tracking the model nicely today as the TRANS continue to lead.  (they’re now almost 14% off the 5-7 high in less than 5 full sessions) 

This fact confirms that the model’s 4-1 rule is in effect (the rule that states inversions are unwound 4x faster than they originally unfolded) because we now see that the TRANS has already wiped out all of the gains achieved since the April 4th high was registered.  -23 session advance (4-2 through 5-7) was just wiped out in 5 sessions. 

Full report coming soon

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