Attack of 15970 Probable for Dow Jones Industrial Average

The Behavioral Analysis of Markets Model was built after studying the similarities of the pre/ and post 1929 stock market crash price-action as well as the pre and post 1987 stock market crash price-action.   And after multiple years, and multiple dead-ends, I finally noticed the exact same pattern of human emotion had unfolded during both of those periods– as well as a common topping count (waves of price-action) also tied to human emotion.

 

And while many analyst talk in terms of optimism and pessimism driving price action into highs and lows, I found that description to be deceiving for one simple reason.  All bull and bear legs (at any degree I’ve studied) terminate (form TOPS or BOTTOMS) on a combination of factors.  For example, a TOP is formed due to a combination of optimism (actual net new purchases of shares) as well as short-covering of shares.  So in this example, the net new purchases can be attributed to “optimism” but the fund managers and traders that either capitulate or forcibly cover their previously shorted shares are not optimistic at all.  Their short-covering is strictly a function of their own capitulation or the forced margin call (broker or risk desk).

 

But more importantly, I discovered what I later came to describe as “retest” levels.  Behavioral Analysis retest levels are completely different than the “retest” levels described and identified through using Technical Analysis.  Retest levels derived through the study of Technical Analysis are typically created on price breakouts or breakdowns and they’re obvious to anyone willing to look at a price chart.

 

Behavioral Analysis “retest” levels (the ones that I discovered, and the cornerstone of my price target work) are completely hidden to the naked eye when studying price charts and were only revealed to me when I took a reverse engineering approach to dissecting the 1929 and 1987 crashes.   In other words, I looked at the final price destination the crashes reached and then worked my way back in time looking for any odd activity that might have occurred at those same price levels during the past weeks, months, and years of price-action.

 

…Which brings us to the reason behind today’s post….

 

Today’s price-action in the DJIA once again shows a completed BAM TOPPING count, and more importantly, a similar (albeit smaller) version of the price fractals I discovered back in 1929 and 1987.  So assuming the DJIA tracks the historic price-action I’ve used to identify multiple mini-crashes, we should see a violent attack of the 15970 level in the Dow Jones Industrial Average during the 7/22–8/12  window (adjusted on 7/26) with the most likely Flash-Crash or mini crash occurring during the 7/28-8/8 period. (adjusted on 7/26)

 

The Behavioral Analysis of Markets Model long term forecast is predicting a July 2016 TOP in this area followed by a massive bear market decline carrying price back below the 2009 low.   We remain bullish Natural Gas, but not much more at this point…

 

*Disclosure:  I am long SPY PUTS at various strike prices and various expiration dates.

 

 

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The Disco is on Fire! Will you make it to the exit?

No change in the stock market forecast.  The BAM Model sees a massive crash coming that should take the SPX down to the BAM 529 magnet over the coming 2-5 months. 

I’ve had some questions regarding upside price targets and I wanted to clarify something. 
When we forecasted a “V” bottom in stocks back in March, we said the buying stampede should unfold into June and we mentioned price targets as high as the BAM magnet at SPX 1132.  But when the SPX started stalling into the 944 magnet we called a TOP in June and watched the SPX reach a high on June 1 followed by a 9% decline into July 8th. 

The entire move from the July 8th low into today’s high is a FALSE MOVE AND WILL BE UNWOUND 4X FASTER THAN IT UNFOLDED ACCORDING TO THE MODEL.

The majority seems to think the market has put in place a large head and shoulders low on the daily charts but any technician will tell you that, if that’s true, we should NOT move back down into that pattern especially if we’re in a bull market.

The model says we WILL move back down into that pattern and once that occurs you should see the technicians come out and talk about the extremely bearish implications.  (Failing patterns create violent fast-market moves in the opposite direction.)

Has anyone mentioned the fact that the weekly SPX RSI is as overbought as it was when we were trading at 1500? 

THIS IS EPIC AND I BLAME IT ON THE MULTIPLE INTERVENTIONS. 

No fear in this tape but I guess that’s what happens when Uncle Sam has your back.  Most seem to understand that the disco is on fire so, although you may be enjoying the music, we suggest positioning yourselves very close to the exit.

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Is Volume Confirming the Model’s Crash Call? YES!

If a market crashes on high volume and then bounces over 50% on low volume, what happens if it rolls over and volume increases again?  The answer is “another crash leg.”

Is it typical for late September and early October to bring an increase in volume?  Is it typical for late September and early October to bring selling pressure? Does one plus one equal two?

It is a fact that in the history of the US stock market, a new bull market has NEVER begun with a large rally like this.  The only other time we saw a large rally like this off a PRESUMED bottom was in 1930.  The best bull markets start slowly and the first leg up is unimpressive.  The second leg up is the monster up leg NOT the first leg up.

I know, I know, the EXPECTED fundamentals are beautiful just like the EXPECTED fundamentals for crude oil were beautiful at the 147 TOP in 2008.

Granted I’m getting run over here but, mark my words–this is going to be a disaster.

-JGS

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