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

As you’ll recall, the BAM US Dollar Index model has been warning us of a coming crash leg back to/through the 2008 lows.  Since that warning went out, we did get back into our long YEN position via the FXY (ETF) in the BAM Model Portfolio, (and that has been working for us) but I haven’t focused much on dollar weakness since then.

Now, however, we need to look around for anything and everything (thus the H1N1 focus lately) that could disrupt the big bounce in stocks and send them back through the March lows.

What is also particularly interesting to me is that the USD model is now matching up nicely with the stock model (which was not the case until stocks inverted recently)–both calling for a sustained decline with lower lows into the first quarter of 2010. (I’m sticking with that SPX 529 target.)

Sure seems like a lot of moving parts to follow–much less move, or “manage”–and I think the model might be telling us that, despite their best efforts, the FED and gov. are making matters worse and that, gradually, they’ll be losing more and more control as we trade forward.

Today’s spike looks to be stalling into this BAM 897 magnet and the market is clearly bearish into 5-6 in my work.

Full report coming soon

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

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

We need to buy 680 with BOTH hands on the way back down this week. 

We should see 688 very quickly and then 680 and then we reassess the “crash” call but I think it’s out the window as I look at how damn bullish the intraday model’s look. 

It’s also possible that what I see as a crash window will take them back down to that INDU 6426 Fibonacci target but that’s close enough for us to start looking at that strategy of buying weakness at 680 and below as opposed to being overly cautious about a crash STARTING at 680. 

I think we do a straight-line down to 680 then basically MELT-UP to 757 and possibly EVEN that 842 magnet into the end of March/first week of April.

Full report coming soon

We’re going to try to trade around the remaining SRS and DUG positions.

Go ahead and take profits on both the SRS and the DUG at the mkt. here (this takes us to a 0% exposure in those names because we took 1/2 our profits in them last week.

Full report coming soon

We’re also at INDU 6565 (another major magnet) and we’re approaching that Fib number I’ve been tracking since last summer at 6426.

Full report coming soon

I see scattered zones of weakness between now and the close today (including one over the next 30 mins.) but what really stands out is the persistent looking zones of weakness AFTER the close today as the futures continue to trade into the afternoon, evening, and night hours.  This has the distinct look of an after the bell negative surprise and it’s going to be interesting to see what transpires.

Stocks were tracking the model perfectly again today as the open faded from a plus 120 to a plus 30 tape but then they mysteriously turned higher, inverted and levitated all day.  No change in my work, we didn’t see 680 as expected today but should see it tomorrow as the crash window opens about 10:00-11:00am PST. 

Full report coming soon

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

No clue what’s holding them up but the tape action is creating additional BEAR zones ahead.

Look for any and all rally attempts to fail today (only creating additional downside velocity as they roll-over) as they attack that SPX 680 magnet before any shot at a decent bounce.)

The volatility model warned us last week that they will go verticle today through Thursday of this week so look for a bit of panic to creep into the tape today as they attack 680.

Full report coming soon