Remember, a bubble stock by definition must be vigorously defended by its participants.  In other words, the outpouring of negative comments regarding our 45 dollar price target on AAPL actually confirms what our model is telling us.  And although I don’t want to attack the attackers (because I understand their reaction to our forecast for an 80% plunge in AAPL) I do want to point out the fact that these people reacted violently and instantaneously, without any knowledge of our track record.

Believe me…I have nothing against Apple or any of their users.  This press release was simply another attempt at providing retail investors with a piece of the information normally viewed only by my hedge fund clients.

Let’s face it, if you think it would be impossible for Apple to decline to 45 dollars between now and 2011, I assume you’ll hold on to your position.  But refusing to even entertain the idea of a large decline in ANY stock has historically proven a bad approach to investing.  The bottom line is that things change.  Maybe there’s a kid in a garage inventing a product that will disturb Apple’s dominance.  Maybe Google has a few more tricks up their sleeve.  Maybe the global economy is poised for another derivatives-led implosion (our model says this is coming) maybe, maybe, maybe.  Who knows what fundamentals will prove out after the fact? I certainly don’t.  But I know the BAM Model’s track record and I’ve learned not to doubt it not matter how crazy the predictions might appear.

As you’ll see below, many of the comments from the MacDailyNews site were typically juvenile, “BAM obviously stands for Boneheads, A**holes, and Morons” while others wanted us investigated “call the FTC” but other comments really do speak to the brainwashing that takes place when a bull-driven bubble stock mesmerizes its participants into believing in their own brilliance.

Comments attached to our press release:

-What an idiot! $42 is less than Apple’s cash in the bank

- BAM = Balmer And Microsoft….

-Speachless (sp) once AGAIN!!!! Stupidity of BIBLICAL PROPORTIONS!

-Where is BAM Investor located? I don’t want to drink what’s in their water.

-They’ll have over $15 EPS at year end what are these guys smoking?

-Can you say stock manipulation?

-The term snake oil salesman comes to mind and what a prize if they can fool enough people into taking the medicine they peddle.

-Apple is not a bubble stock. It had $9.6B in earnings last year, and will likely have $13 to $14B in earnings this year. Bubble stocks don’t have earnings to support their share price, Apple does.

-I last heard that Apple’s cash in the bank is at $52 per share. Doesn’t he have someone the understands basic quarterly reports to help this idiot out?

-This one truly needs to be investigated. In attempting to create a self-fulfilling prophesy, I’ll bet they have a sizable wager in the market themselves. Even a small move, created by this hogwash, may make them money. Scum.

-As someone else mentioned, I’d like to see more then two or three cases where these dudes were right. Even I can get lucky – one in a million times perhaps. Real data please or STFU!

-There is NO WAY to predict the future of random systems

Past Results of our “Random System”

As I said earlier, I have nothing against AAPL.  We’re simply passing along information generated by the BAM Model to attract attention to our product in an attempt to help those willing to listen.  After all, every single downturn sprouts a whole new group of people complaining that they “should have sold.”

Here’s the unedited, original BAM Report we mailed to hedge fund clients back in November of 2007 just after the DOW hit an all-time high at 14,198.  The news was almost unanimously bullish as were investors, and the individual stocks we highlighted (with “outrageous” downside price targets) were all seemingly healthy as they hovered 70% to 100% above the downside targets our model predicted.  As you’ll see below, these stocks read like a who’s who of big names, they were in diverse sectors, and the vast majority of Wall Street analysts were extremely bullish at the time our report was published.  Needless to say, we were laughed at back in 2007 just as the AAPL cult is laughing at us now…     

AIR, AIR, EVERYWHERE

November 12, 2007

-The stock market tracked the BAM model well last week as stocks suffered their biggest three day decline in five years with the NDX plunging in a “straight-line decline” to the 2056 magnet level just as anticipated. But now, just as investors probably think it can’t get much worse, it has.

-Lets start by reiterating the bigger-picture BAM stock market forecast which points to a brutal 58% bear market decline into 2010 with the SPX round-tripping the entire 2002-2007 bull run before finding support into the SPX 680 level.

That’s right, regardless of election year cycles, the Olympics in China, emerging market strength, a possible interest rate easing cycle etc. etc. etc. our model is unequivocally ultra-bearish over the coming few years in fact it most closely resembles the set up we had during the 1929-1932 period.

During the 1929-1932 period—to dissect it a bit for you—started with a crash followed by a large bounce followed by a variation of mini-crashes and long grinding declines.   No two periods are exactly the same, but as I take a step back and look at our stock model, it has a very similar set of sell signals, future periods of weakness etc. as did the 1929-1932 period.  In fact, the only real difference between the 1929 through 1932 period is that the current set up actually looks MORE bearish in our work.  Maybe that’s impossible, and maybe it’s not but let’s just say I can honesty tell you all that this is the first time I’ve ever hoped our model is 100% wrong.

Individual Price Targets Also Confirming Model’s Bearishness

When we first started talking about the enormous real estate bubble in 2005, the BAM model was giving us what appeared to be absurdly low price targets for stocks like HOV, DHI, BZH, KBH, and TOL during what we thought at the time would be a huge real estate collapse into 2009.  Well, those absurdly low price levels now seem believable—because we’ve already reached most of them—and  we’re now ready to talk about some equally absurd price levels we think other stocks will see on either a crash leg or over time during the next several years.  This is just a small very random sampling but it should serve to illustrate what we see coming.

GM-6.00, possibly even 2.50, into 2009

RIMM-48.75-crash leg, 24.00 into 2009

FSLR-120 crash leg, 52 during 2008

GS-70 into 2009

GOOG-293 into 2008

BIDU-187 into 2008

LM-23 possible on crash leg or into 2008

…Now let’s take a look at the results of the above predictions:

GM-6.00, possibly even 2.50, into 2009 (30 at report date, went bankrupt)

RIMM-48.75-crash leg, 24.00 into 2009 (102.60 at report date, crashed to 35.05)

FSLR-120 crash leg, 52 during 2008 (177.70 at report date, crashed to 85.28)

GS-70 into 2009 (214.71 at report date, crashed to 47.41 and was saved by bailout)

GOOG-293 into 2008 (632.07 at report date, crashed to 247.30)

BIDU-187 into 2008 (310.50 at report date, crashed to 100)

LM-23 possible on crash leg or into 2008 (72.86 at report date, crashed to 10.35)

Here’s the link to the full report from November 12, 2007 if you’d like to review it.

http://www.baminvestor.com/blog/2007/11/

Apple Sauce?

OK, lets get back to the current prediction by showing the a chart of AAPL along with a detailed description of the expected decline.

We should see an initial fast-market collapse to the 155 price level on the first leg down and that will most likely occur this summer or very early in the Fall of 2010.  It would be typical to expect vibrating at the 155 level and the move to 45 dollars would then be a violent thrashing affair as bulls are stopped out in a grueling decline to the 45 dollar target (a BAM Magnet).  The move to 45 dollars per share will likely be achieved during 2011, but there remains a small possibility that we could see a collapse to 45 during 2010, so we suggest caution if you’re planning on trading the decline.

But technically, all is not well.

Let’s focus on two US stock sectors that led the advance into the 2007 bubble TOP—the XBD Index and the XOI Index–as well as the ultimate “tell” according to our work–China.

Do you all remember when finance and energy were the two “can’t lose” investment themes for the next ten years?

Even after the catastrophic crash, analysts continued to hype these sectors with chatter about China and India growth rates driving peak energy prices at the same time that globalization would fuel demand for sophisticated US financial products.

But if that thesis is correct, why aren’t these two popular indexes leading the market to new highs?

Have you noticed that these two sectors topped back in October when the BAM Model started to turn extremely negative the major averages?

That’s right.

The XBD topped on October 14, 2009 and the XOI topped on October 21, 2009 and if these two indexes roll-over and break the year’s lows, that will be a great indication that the other averages will be playing “catch up.” (or catch down if you prefer)

Now let’s focus on CHINA as their market looks most likely to crack the years lows ahead of the other indexes.

Back in November of 2008, the $DJSH (DJ Shanghai Index) bottomed and turned higher a full 4 months before the SPX bottomed in March of 2009.

Now, it appears that the same dynamic is occurring again (China leading the world’s markets) as the DJSH looks like it TOPPED back on November 24, 2009.

The confirmation of this idea will come soon IF and when the DJSH breaks the 2-3-2010 low and once that happens, we should see sell programs reign around the world as markets begin the acceleration phase of the expected crash.

Velocity remains in crash mode on a monthly and weekly basis but we need a bounce to properly align the daily and 60 minute models.

Remember, as the markets roll-over, we’re going to see a massive number of BAM Model sell signals triggered (cascade sell signal) so even if the velocity model is not perfectly aligned, we can still see multi-hundred point down days, we just won’t see the 700-1000 point swings we saw during 2008.

We continue to favor the long side of the FXP (Ultra-short China Xinhua) and we are long that ETF in personal accounts as well as the BMP (BAM Model Portfolio).

If you missed the Jim Chanos interview on the Charlie Rose show, it is worth watching.

Chanos talks about arguably the biggest bubble in the history of mankind.

>> Click Here to View

Here’s an interesting article released yesterday.  It didn’t gain a lot of attention but that’s pretty typical when sentiment moves to an extreme.  (USD bearish sentiment readings are at record levels)

Our model is extremely bullish the US Dollar and we remain long.

=================

IMF/DOLLAR (URGENT)

WASHINGTON, Nov 19 (Reuters) – The U.S. dollar will remain the world’s primary reserve currency for many years or decades, an International Monetary Fund official said on Thursday.

Spokeswoman Caroline Atkinson’s comments came two days after IMF Managing Director Dominique Strauss-Kahn said the world can no longer rely on a currency issued by a single country, and a new global currency may evolve out of the IMF’s in-house unit of account, known as Special Drawing Rights. (For more, see [ID:nPEK204168])

“The managing director has said … he expects the dollar to be the leading reserve currency for many years or decades,” Atkinson said at an IMF media briefing.

She said the IMF routinely looks at what is happening in the international monetary system, but was not launching any sort of formal study into how SDRs might one day replace the dollar as a global reserve currency.

“During this last financial crisis, people actually found the dollar a safe haven and preferred to move into dollar assets when risk aversion was very high,” she said. “That suggests there’s very solid demand, based on the U.S. economy’s strength and size and liquidity of its financial markets.”

The dollar’s role in the world economy has been a topic of debate in recent months as its value fell against a basket of currencies. China, the largest foreign buyer of U.S. government debt, has expressed growing concern that the weakening dollar would hurt its finances. (Reporting by Emily Kaiser, Editing by Chizu Nomiyama)

These men and women risk life and limb for next to nothing while Wall Street feeds at the trough.

We need to stop the lip-service and show our commitment to these returning heros by including them in the American dream.

Hell, we could GIVE each and every one of them a FREE home for less than the tax payer subsidized bonuses we’re going to be paying Wall Street in December and January alone!

A friend of mine sent this piece to me written by Dylan Ratigan, and it echos my sentiments exactly.

Please take a moment to read it and see if it makes as much sense to you as it does to me.

Sincerely,

JG Savoldi

===============================

The following piece was written by Dylan Ratigan

One thing about doing a two hour show that heavily covers both the financial crisis and the wars in Iraq and Afghanistan is that you notice on a daily basis the shocking juxtaposition between the lucky Wall Streeters and the unlucky soldiers.

We all know at this point that our banking system is being used as an unregulated bonus-seeking mechanism for bankers, now underwritten by taxpayers with $23.7 trillion worth of national wealth.

Bankers lent pretend money to home buyers to award themselves actual money in bonuses — making home prices balloon and, in the process, bankrupting America’s treasury, currency, the states, and many of its citizens.

To simply let the housing market rapidly correct itself (or more likely over-correct) would result in massive societal disruption, possible violence and unnecessary suffering.

So while we slowly attempt to close the taxpayer-funded bank casinos and try to restore the basic rules of investment and lending in our economy, we have difficult decisions to make.

Unfortunately, our only choice for a less jarring social transition so far has been to artificially adjust the real prices of our homes via government guarantees to banks (for bad mortgages and losing gambling bets) — or relatively arbitrary handouts to home buyers.

What did these people do to deserve the handout?

How do you feel about a Wall Street Banker who has been renting an apartment here in New York and this year combined the bonus money he made on bundling new taxpayer-sponsored Fannie Mae CDS with a first-time home buyers tax credit gift from the taxpayers to buy the penthouse in his building?

Meanwhile, we have already been at war for 8 years with no end in sight. World War II was 5 years. We are fighting these wars with the fewest number of soldiers in modern U.S. History. To avoid incorporating a politically unpopular draft, we deploy the same soldiers five or six times with comparatively minuscule breaks in between.

However, the dire state of the economy has been a boon to military recruitment, but I am not sure if we will ever see the Wall Street bank scammers claim their rightful credit for that.

So instead of using these bad- (Wall Street) to- arbitrary (first time home buyers) ways to pump money into rescuing our housing market, let’s give it to those who are truly deserving of handouts: our servicemen and women.

I propose that we immediately enact the following:

• Give every single man and woman that is fighting for us a housing credit of $50,000, with the caveat that the credit must be used by someone within two years.
• Make it so that the credits are completely fungible, meaning that if the veteran doesn’t wish to buy a house, he or she can sell the credit to someone who does — and keep the money. If the reselling of gift cards on Ebay is any indication, I am sure there will be a thriving market where soldiers could probably get pretty close to 90 cents on the dollar for their credit.

Considering the roughly 2 million veterans who have served in Iraq and Afghanistan so far, this would give a much needed $100 billion boost to the housing market. Just as a template for comparison, Goldman Sachs (albeit it doing “God’s work”) and the other complicit banks like JP Morgan and Morgan Stanley will pay $29.4 billion in personal bonuses this year.

In reporting on this financial crisis, I have been most surprised by the blatant disregard that our politicians and even some journalists have shown for the most fundamental American notion of fairness. I don’t think handing taxpayer trillions to some of the least worthy individuals is something that our country will stand for, regardless of what the current incumbents think.

If we must resort to handouts to save our country, let’s at least put them in the hands of the most deserving.

What I’m referring to is the wheat market and our purchase of wheat during the recent Twitter Campaign.

The model’s September prediction of a “melt-up” in the wheat market was followed by what analysts in a Bloomberg article today called “the biggest October rally in at least 50 years.”

However, for investors bold enough to follow the BAM Model’s prediction (buying into a multi-year low) the move had a more direct impact–one they saw reflected in their accounts.  Case in point is the tweet we received from a Twitter follower on October 21st saying “@Baminvestor per your suggestion, lightened up on Dec wheat today, sold a few contracts for a 950% profit, looking for the dip to re-enter.”

We’re glad the position worked out so well (we still own it ourselves) but our interest in bringing this post to you all is in simply pointing out the unpredictable nature of Mother Nature.

It turns out that the “experts” (the guys bearish wheat prices) were caught off guard when “recent weather patterns delayed planting.”  It was that quote–blaming the largest rally in 50 years on weather–that prompted this posting.

You see, one of the calls that first grabbed the eye of the hedge fund I eventually went to work for was a prediction in the OJ market back in 2004.

It was May of 2004 to be exact and Orange Juice had been in a brutal 13 year bear market from 1991 to 2004.   Adding to the brutality–as well as the certainty–of the decline was the fact that the nation was caught in the grips of a diet mania known as the “Atkins Diet.”  Some of you may recall that “low-carb” fad and, as we all know, orange juice is about as high in carbs as any drink out there.  Anyway, long story short, people did as they always tend to do, they moved heavily into an investment position at exactly the wrong time–shorting orange juice aggressively right into May of 2004.

The BAM Model on the other hand, was screaming bullish and alerting us to an immediate upside price reversal that would–if the market tracked the model–lead to an EPIC melt-up.

All of my friends thought I was crazy and they ignored the model’s call, choosing instead to follow the adage “the trend is your friend.”

Guess what happened next?

Four devastatingly strong hurricanes ripped directly through the orange groves of Florida.  In fact, Polk county–ranked first in citrus production–was the only county in the state to feel the eyewall of three of the four major hurricanes–Charley, Frances, and Jeanne.

What followed next was a 220% move in OJ that not only caught the eye of that hedge fund I referred to, but proved to me without a doubt that cycles in human behavior tend to peak opposite the cycles of mother nature.

It also taught me to never question the predictive nature of the BAM Model–no matter how seemingly outrageous those predictions might seem.

Click HERE for the full Bloomberg article.

JG Savoldi

During that period we continuously warned clients that the BAM Model was signaling an imminent stock market crash based on a “melt-up” in the US Dollar Index.

We also warned clients that this fairly new trading dynamic (we first identified it back in 2007 with relation to the YEN Carry Trade) whereby formerly diversified markets now move in lock-step, looked to us to be the single most dangerous dynamic we’ve seen in our years of following markets.

The idea that a major train-wreck based on a mechanical unwinding of a single (crowded) trade could crash AND melt-up markets across the globe is simply a disaster waiting to happen.

Today, Nouriel Roubini, Chairman, RGE Monitor, shares a similar forecast with us based on his fundamental view of the markets.

Click HERE for full story on CNBC

Of course, if this does occur as our model is predicting, we’re going to hear the same old tired excuses from the masters of the financial universe.

In our opinion, we simply have too much money being controlled by too few “brains” but since this pattern of boom and bust is destine to repeat over the coming years, we’ll simply do the best we can to protect our followers and allow subscribers to make money from these apparently predictable blunders.

Our response to them was that it is typical for the BAM Model to predict a crash prior to any Hindenburg Omen trigger.

In other words, while not predicting a Hindenburg Omen sell signal, IF we do see one we’ll likely see it trigger at lower levels after the crash is well underway.

I’ve posted information from Wikipedia here so that you can familiarize yourselves with this concept.

The Hindenburg Omen is a technical analysis that attempts to predict a forthcoming stock market crash. It is named after the Hindenburg disaster, the crash of the German zeppelin in late May 1937. The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market – specifically the NYSE – such that the probability that a stock market crash occurs is higher than normal, and the probability of a severe decline is quite high. The rationale behind the indicator is that, under normal conditions, either a substantial number of stocks establish new annual highs or a large number set new lows – but not both. However, this indicator mainly tracks new lows and downside risk. A healthy market requires some degree of internal uniformity, whether the direction of that uniformity is up or down.

Criteria

The traditional definition of a Hindenburg Omen has five criteria:

• That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.

• That the smaller of these numbers is greater than 75. (this is not a rule but a function of the 2.2% of the total issues)

• That the NYSE 10 Week moving average is rising.

• That the McClellan Oscillator is negative on that same day.

• That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen. A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.

Conclusions

Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days.

The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. However, the occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down, although every NYSE crash since 1985 has been preceded by a Hindenburg Omen.

Because of the very specific and seemingly random nature of the Hindenburg Omen criteria, it is possible that this phenomenon is simply a case of overfitting. That is, if one backtests through a large data set and tries enough different variables, eventually correlations are bound to be found that don’t really have any predictive significance.

However, the fact remains that out of the previous 25 confirmed signals, only 8% (two) have failed to predict at least a mild (2-4.9%) decline.

The effects of the recent merger of the NYSE with Euronext may have an effect on future predictions.

All information provided by Wikipedia–  http://en.wikipedia.org/wiki/Hindenburg_Omen

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.

This has certainly been an interesting period for our business launch (to individual investors) and we hope we can assist a few in protecting their hard-earned money.

The catalyst for the expected crash–assuming we get this right–could come from anywhere or nowhere at all, but our best guess is that we’ll see USD strength set off a global short-covering stampede in the dollar index.

Assuming that occurs, it would likely spark a vicious cycle whereby mechanical selling–and buying in markets where Carry Trade money has found a home on the short side–literally unwinds this undiversified single-bet that the masses seem to be clinging on to.

Subscribers will remember that this is the same dynamic the model identified during 2007-2008 vis-a-vis the YEN–and we all know how that ended.  I vividly recall clients telling me the model’s very bullish YEN call made no sense at all and that Japan was still many years away from any recovery that could provide the proper fundamental backdrop for strength in their currency.

Don’t forget that whatever happens during October, this is only the start of the next leg down according to the model.  We’re facing what appears to be a brutal five months ahead of us and our target remains down at SPX 529.

As I said to clients yesterday…the rest is up to Mr. Market.

According to our model, we should see sharp downside moves in both of those mkts into Friday (October 9th) and, yes, we’re sticking with our SPX target of 944.

The BAM Model–as far as this bearish forecast is concerned is locked in place and there’s nothing that will change the forecast.  Could it be temporarily wrong?  Sure.  But based on everything I’m seeing, I’m confident we’ll be crashing very soon.

So what’s with Monday and Tuesday’s big rally?  (yes we’ve heard that a lot)

Well…the bounce of the last two session was a necessary element if we’re going to see a crash, in fact, all crashes experience a period of “stretching the tape” before the crash accelerates to the downside.

This stretching of the tape is a result of bulls and bears fighting it out and it’s what creates the “resiliency” to pain which is what allows people to hang on to losing positions way too long which in turn forces the inevitable “capitulation” that comes at the bottom.

By the way, this dynamic happens fairly frequently if you study fractal-level intraday charts.

So could the market make another higher high?  Sure it could.  But I seriously doubt it will and if it were to occur, we’d be even more aggressive in buying November PUTS on the Nasdaq and Russell 2000 Indexes.  Is that reckless.  No, not according to our model.  According to our model, this is the time we must step up and follow its instructions.

The “Set-up”

This market ‘set-up’ has taken months and years to fall in place–as do all market crashes or melt-ups according to our work–and although the exact turning point can be tough to identify, I’ve never seen a single set up like this fail during the 90 years of stock market data I’ve studied.

But what about all of this talk about “resiliency?”

The stubbornness–many have been calling it “resiliency”–is exactly what is necessary to create a crash.  Think about it.  In order for a market to crash, you must have the majority on the wrong side of the trade.

By its very nature, a crash requires a boatful of investors on the “wrong side”–not simply a handful.

One thing is certain.  We’ll all know the answer to the October crash question soon enough.