These juiced ETF’s are excellent trading vehicles but there’s no question they’re very, very dangerous.

We recommended the $FAZ to our Twitter followers on September 23rd when it was trading at about 19.57 but we also tell followers and subscribers that these are positions we’re involved with and that if they should want to invest in our “model portfolio” to use no more than 2-12% of their invest-able dollars.

For us, a more interesting take-away on the ETF debate (we have a model based on behavioral analysis theory) is the way in which the leveraged ETF’s are feeding the publics appetite to gamble.

History teaches us that we humans tend to go through periods where we love to speculate, followed by periods where we hate to speculate.

Unfortunately, markets are very large now and that means that when risk appetite plunges (after a big feast) everyone runs for the restroom at the exact same time. (sort of like 2008).

Back in 2005-2006, we were able to predict in detail what would occur during the crash of 2008-2009, (see weekly report archives on the blog) because the BAM Model predicts when market participants will be resilient to pain (losses) and when they will not be resilient to pain.

Ironically, when people are NOT resilient to pain, they close incorrect positions out very quickly and the markets tend to trade in a more normal, more stable manner.

It is when resiliency is high that investors will allow a position to “get away from them” and it’s that dynamic that causes large price moves–either bulls riding losing positions down or bears riding losing positions up–that sets up the compression that allows the market’s inevitable “capitulation.”

There is never a capitulation set up in markets with low resiliency and there is always capitulation in markets with high resiliency.  (Our model tracks market resiliency–all of the markets we’re tracking –on 7 “fractal” time period ranging from monthly, weekly, daily, hourly, 5 min, 1 min, and 25 tick.)

Today’s market, interestingly–and for the first time in the history of my market data–is registering resiliency at an all-time high for both bulls and bears. This is a dynamic most often associated with expanding patterns whereby price makes higher highs AND lower lows during a trading period where both bears AND bulls have a very high level of conviction that they are “correct” in holding positions (stubborn).

Today’s macro environment is obviously a disaster to anyone wishing to use common sense and for that reason the bears think they’re correct but, because government intervention has provided a perpetual “backstop,” bulls feel correct in anticipating an eventual recovery and they’re also probably playing the odds w/ respect to the old adage–”never fight the FED.”

Unfortunately, that dynamic (complacency created by government interventions) has, along with unprecedented fast-money in hedge funds, placed us in a position where our model says we’re going to witness the largest crash in the history of markets as we trade forward.

We all understand what happened in Japan and it seems odd that we’re repeating many of the exact same mistakes they made. I’ll leave the fundamentals to people specializing in that field and we’ll stick to our behavioral analysis work.

Our model is predicting a massive crash and we have a target of SPX 529 over the coming 2-5 months.

If you are interested in following our work in real-time each day, go to our Twitter page .

Here’s our press release from 9-21 with our forecast of a 50% crash in the stock market as well as our crash call in crude oil.

Press Release: BAM Investor shares predictions on Twitter for Free

CommodityOnline: ”A 50% crash in stock markets may happen soon?”

TechNews.AM:  ”How accurate are BAM Investor’s stock predictions?  Check Twitter”