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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BAM Model Calling For TOP in S&P 500

As subscribers and Twitter followers at @baminvestor and @bamglobalpro know, the BAM S&P 500 Model has been calling for a major stock market TOP into April 10th.   This expected turning point high is predicted to occur into the early morning hours–ideally between the 7:45-8:30am pst period–with an estimated price target of 1580-1585.00.    Assuming the market tracks the model properly and posts a reversal high on April 10, followed by late session weakness, the bigger-picture models are pointing toward a decline into April 15-17, followed by a bounce, followed by severe weakness into about May 6 to kick-off the decline.

Price projections for the severity of the assumed decline are tough to measure until the market rolls-over, but once we’re able to gather readings from our proprietary BAM-VI (Velocity Indicator) we will update subscribers.  At this point our forecast calls for a decline of at least 10%, and using history as a guide, our model tells us that price extensions within inversions (represented by the 21 month advance spanning November 2012 through April 2013 period) are unwound four times as fast as they originally unfold.  We call this our “rule of four” and it implies a complete give-back of all gains posted during 2013, over a short 5-6 week period (or into May 15-22).

Perhaps more troubling, is the fact that our Russell 2000 Model and our Nasdaq 100 model are both in a crash fractal configuration as we write, and although these fractals do not necessarily have to unfold per the script, we’re always very cautious when they appear.  That said, we’ll be monitoring global markets very carefully for clients as we move forward because the backdrop is proper for a full-blown debacle during 2013.

Long-time followers know that we built the BAM Model through the study of fractal boom and bust periods and we have an in-depth knowledge of the 1929-1933 period, the 1987 period, as well as the May of 2010 flash-crash period.  All of those events were predictable as all unfolded within crash fractals of various degrees.

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IMF Signals Support for US Dollar

As you all know, our model is calling for a USD melt-up coincident with a stock market crash and we believe that has finally started.  We also believe the quant-driven “one-trade” dynamic of dollar DOWN/stocks, crude, gold, etc. UP will be looked upon (blamed) as a “catalyst” once the market crashes.

dollar_note_0127_22

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.

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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)

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Massive Stock Market Crash Imminent According to BAM Model

Well, it looks like we’re at the moment of truth with respect to the BAM Model’s prediction of an imminent stock market crash.  Clients should be well prepared, having been provided ample warning and we’ve also done our best to warn individual investors who have been following us via our blog, website or Twitter campaign.

Imminent CrashThis 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.

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“Stretching the Tape”

First of all I want to reiterate the BAM Model’s prediction calling for a stock market crash.  I also want to reiterate it’s prediction calling for a crash in Crude Oil–taking that market back to/through 36 dollars per barrel into year-end.

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.

Stretching the Tape

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.

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The 1929 Stock Market Crash vs the Current BAM Model Prediction

The 1929 market crash was key in building the BAM Model but what’s it telling us about today’s stock market?

We depend 100% on our proprietary BAM model but we also try to keep our head up with regard to other interesting ideas.  After all, our model makes some of the most outrageous predictions from time to time–like telling us that crude oil would crash from 147 dollars to 36 dollars over a 12-18 months period back in 2008.

Well…here we are again. 

We’re standing out on a limb here with our call for a 50% crash in the stock market over the coming 2-5 months and although we could have held that forecast to ourselves, we’d rather walk the talk by putting ourselves and our money on the line here.

These are interesting times and although I’d love to be bullish and I’d love to be the guy bringing great news to the table, the model is the most bearish I have ever seen it.  This includes the readings at the all-time high in 2007 and it also includes the 2008 pre-crash readings we were seeing.

I’ll leave the fundamentals up to those who follow that discipline, but the BAM Model, as we saw so many times during 2007 and 2008, is predicting something that most seem unprepared for– and we’re going to follow its predictions.

-Bearish stocks
-Bullish Bonds
-Bearish Crude Oil
-Bullish USD
-Bearish Gold

Disclosure: we have current positions reflecting all of these predictions

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