Although the prediction game is a treacherous one, Wave Strength Options Weekly editor Adam Lass says more financial storms are just as likely as bad weather this hurricane season.

This means the S&P 100 Index (OEX), which contains the 100 largest players on Wall Street, could be about to lose at least 10% of its value.

And that’s a best-case scenario. The drop could run to over 50% in a major crash scenario, according to Adam. Placing puts against the weakest players in the index is the best way to prepare for these “inevitable” losses.

The predicting game, whether it be weather or markets, has always been a treacherous business, rife with opportunities to make one look foolish. For example, one scant week ago, New Orleans Mayor Ray Nagin warned his citizens that Hurricane Gustav would be “the mother of all storms.” Then the Big Easy got lucky and ducked the bullet.

The evacuations went reasonably smoothly (aside from a few roving gangs of well-armed drunkards), and the levees held. Now Nagin has gone on record describing Gustav as merely “the mother-in-law of all storms.”

Did he “blow the call”? Or did he finally learn a lesson or two from the disasters of the past? Nagin most certainly claims the latter, and says that he would do it again in a heartbeat.

A quick glance at the National Hurricane Center’s Atlantic map shows Tropical Storms Hanna, Ike, Josephine and Karina marching toward the U.S. like little soldiers in a row. And despite applying billions of dollars of equipment and science to the problem, the NHC cannot tell us for a fact where and when each of these storms will make landfall, or exactly how powerful they will be.

Some say that in the end, if you live in the vicinity of Hurricane Alley, it is a judgment call as to whether or not you board up your windows and flee or hunker down with a radio, a flashlight, a loaded revolver and a case of your favorite malt beverage.

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I’ll trump that: I would go so far as to say that your judgment may very well be impaired for living below sea level in the first place. It may be pretty, but history tells us that sooner or later, you’re going to be under water. Maybe not today. But quite possibly tomorrow.

The U.S. stock market is in pretty much the same circumstance. The line of storms that are battering our financial coastline were always visible on the horizon for those who cared to look.

Super low interest rates… overbuilt real estate… the collapse of the dollar… skyrocketing costs… failing employment… and finally, a crashing stock market.

The names are not quite as poetic as Gustav, Hanna, Ike, Josephine and Karina. And maybe we couldn’t name the day of the month that each would plow into us. But the extent of their impact was quite predictable.

Here is my very own equivalent to the NHC’s Atlantic Storm map. It shows rather clearly both the current “climatic conditions” driving the market and the probable “financial coastlines” the next “storm” will most probably hit.

In plain English, the 100 largest stocks on Wall Street are a lock to lose more than 10% in the very near future. What’s more, that loss could easily extend to more than 23% a month or so later.

And that’s the good news, a mere “mother-in-law of all storms,” because an OEX drop from the current 585 to as low as 277, a 52% wipeout that would certainly qualify as the “mother of all crashes,” is lurking out there on the horizon.

But wait: Remember how I said that weather forecasters weren’t but so good at telling you exactly where and when a hurricane might hit? What history does tell them is September is “storm season.”

Curiously enough, their storm season is our storm season, too. There were three Septembers during the bear market of 2000-2003. Their monthly losses were 8.22%, 7.63% and 11.52%. On average, it is fair to expect this September to cost blue-chip investors more than 9% of their accrued wealth.

Once again, it is entirely up to you as to how you choose to prepare for this September’s inevitable losses. You could buy more puts against the weakest S&P 100 players, as we have suggested repeatedly both here and in my regular WOW columns.

Or, you could crack open a can of your favorite malt beverage, kick back on the roof, and watch your money go floating out the attic window.

Source: The Mother of All Market Crashes