The Hindenburg Omen

[LVG]

FYI. Thoughts?

http://www.thestreet.com/story/10835851/1/hindenburg-omen-is-a-stock-market-crash-imminent.html

In case you hadn't heard, Thursday's action on the New York Stock Exchange registered a technical anomaly known as the Hindenburg Omen. Read: just like the doomed German airship, the markets are fated to crash and burn. Still worse, Wednesday's trading action almost sparked Hindenburg Omen conditions. It takes two Hindenburg Omen trading days within a 36 day window to trigger the end of life in the markets as we know it.

...

In the mood for some more Hindenburg Omen doomsday numbers? The probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, according to historical data quoted on Benzinga. It usually takes place within 40 days of the first Hindenburg event. The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%.

That said, there are plenty of Hindenburg false alarms, too -- and, for that reason, some analysts claim that it requires not just two, but between three and five Hindenburg events within a 14-day window to really send the signal to take the chips off the market table.

More at the link.

 

[Gaddabout]

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[conraddobler]

It's not confirmed yet, if you read it you need two within 36 days.

An unconfirmed HO is basically nothing, all this one did is put the possibility of a confirmed one on the clock.

In terms of the stock market, it's already crashing and has been crashing and continues to crash, the problem is it's valued in dollars so people only see a tiny portion of the crash.

When you plot the Dow's value in terms of gold, it continues to crash.

http://seekingalpha.com/article/181605-stocks-gold-and-the-real-value-of-the-market

 

[Divide Et Impera]

I predicted (initially) that the Dow would drop to 6300 (it's true; it's in a post on here). But, when it reached that level, I did not think we had actually bottomed out and I revised my prediction down to 4500 (that's also on here). Now, when the Dow turned back around, I never would have expected it to hit 10,000 again and I'm pretty sure I said as much on here as well. I predicted that it would precipitously drop to wretched lows before hitting 10,000 again.

So, what we have is a Dow that has been reshuffled with new entrants and that has caused this false high. Please don't forget, everyone, that 2-3 stocks on the Dow were removed and replaced with stronger stocks. So, our levels now are not based on the same Dow composition in 2008. This is a refurbished Dow.

Anyways, here we are at close to 11,000 (I haven't checked but we have to be at least at 10,700, right?). If the Dow crashed, it would not surprise me. It would be exactly what I have expected all along.

As for this Hindenburg Omen, well, the clock is ticking now. I know that Wall Street hires the best physicists and engineers to create the models used to predict these things. We'll see if these guys are worth their salt. Please understand that all that has been happening since the Dow bottomed at 6400 (or so) is nothing more than profit taking. The investor class has been reinflating the popped balloon and scooping off the top. The Dow is at a false high not only stucturally (as explained above), but also as a measure of investment.

And no, this cannot be blamed on Obama.

 

[RugbyMuffin]

I predicted (initially) that the Dow would drop to 6300 (it's true; it's in a post on here). But, when it reached that level, I did not think we had actually bottomed out and I revised my prediction down to 4500 (that's also on here). Now, when the Dow turned back around, I never would have expected it to hit 10,000 again and I'm pretty sure I said as much on here as well. I predicted that it would precipitously drop to wretched lows before hitting 10,000 again.

So, what we have is a Dow that has been reshuffled with new entrants and that has caused this false high. Please don't forget, everyone, that 2-3 stocks on the Dow were removed and replaced with stronger stocks. So, our levels now are not based on the same Dow composition in 2008. This is a refurbished Dow.

Anyways, here we are at close to 11,000 (I haven't checked but we have to be at least at 10,700, right?). If the Dow crashed, it would not surprise me. It would be exactly what I have expected all along.

As for this Hindenburg Omen, well, the clock is ticking now. I know that Wall Street hires the best physicists and engineers to create the models used to predict these things. We'll see if these guys are worth their salt. Please understand that all that has been happening since the Dow bottomed at 6400 (or so) is nothing more than profit taking. The investor class has been reinflating the popped balloon and scooping off the top. The Dow is at a false high not only stucturally (as explained above), but also as a measure of investment.

And no, this cannot be blamed on Obama.

Makes sense.

From a business stand point I have seen no difference between the 6,000 level last year, and 10,000+ we are expereincing now.

So the "inflated" Dow number sounds right, and would explain why things still feel like if the DOW was at 6,000.

But, if this is the case then we have a artificial rising market, so does that then apply to said Hindenburg Omen and negate it? Hell if I know.

 

[conraddobler]

One thing to add though is that the average life of an American has never been LESS tied to the value of a stock index than it is now in terms of how that relates back to the actual business enviroment THEY have to face.

It makes a huge difference now to them in terms of their retirement accounts more so than ever that's true but in terms of the rest it's nearly completely disconnected.

Earnings are actually quite good, most of the problem though is that it's nearly all been achieved by cost cutting, aka layoffs.

So I'm not sure given the dollar and the earnings if the stock market is that terrribly over valued.

I think we could revist the lows again but in more of a grinding fashion than a crash, crashes come when almost no one is predicting them, this last one was much less predicted than the one that's supposedly comming in the future.

None of that means squat past the average persons 401k value though, in terms of jobs and their personal lives, they've been outsourced and rif'd to death.

It's an odd economy where people are reduced to the bare minimum, big business is making fistfulls of dollars and small business is getting killed.

 

[Duckjake]

It's an odd economy where people are reduced to the bare minimum, big business is making fistfuls of dollars and small business is getting killed.

So where is that money going? Overseas? Buried in their backyards? Into banks who just sit on it and pay 1.2% interest? That is the most important question for an investor right now imo.

 

[RugbyMuffin]

So where is that money going? Overseas? Buried in their backyards? Into banks who just sit on it and pay 1.2% interest? That is the most important question for an investor right now imo.

They are hording the money, or it is going overseas.

Welcome to the new USA. It is not even just about the money anymore, it is about power.

The only way to be more powerful than the 4.5 billionaire is to become a 4.6 billionaire.

There is an amazing amount of money horded away in the fabled 2%.

The trickle down effect is great......except when the faucet is turned off.


And all of this is ****** since all this money is as valuable as the country it stands for. Hoarding money weakens the country, which weakens the dollar, which makes these "rich" less rick by choking their own system.

Not to mention that if you start having enough people unemployed, or working 3 jobs, 14 hours a day, 7 days a week you are getting kindling ready for a revolution, or at best a complete implosion of the entire system. Either of which would crash the system and turn billionaires into people with a billion dollars of little green peices of paper. Furthermore, those same 2% would now have to look the oppressed in the eye and hope they don't get strung up by there boots.

Just doesn't make sense in my mind. When the city of Newark, NJ says they have a 200 million dollar deficiet and then I think to myself that there are thousands of people who could cut a check for that amount, and not even blink or miss that amount of money, it screams to me that something stinks.

 

[conraddobler]

Several solutions to the concentration of wealth problem

A. Strip bare all incentives from any company that outsources overseas.

B. Institute a 90% estate tax paybable upon death, 1 million gift exemption lifetime per individual period, all other gifts to individuals are taxed at 90%.

C. Institute a lazy capital tax, ie if it's not invested in a going venture, aka a business your net worth is taxed at 10% per year when you go over 10 million.

Problem solved.

 

[82CardsGrad]

So where is that money going? Overseas? Buried in their backyards? Into banks who just sit on it and pay 1.2% interest? That is the most important question for an investor right now imo.

There is some deal-making starting to occur (Intel buying MaCafee, BHP hostile bid for Potash...). But, the overwhelming majority of $$ is being put under the mattress as companies are preparing for the impact of ObamaCare and higher taxes... or, that's what they say anyway...

All that said, this article indicates that companies are in fact beginning to part with some of their record-breaking cash holdings:

Companies are boosting their spending: Could jobs be next?
By Paul Davidson, USA TODAY
Federal Express (FDX) is snapping up more airplanes. Caterpillar (CAT) is expanding factory capacity. And Wynn Las Vegas (WYNN) is remodeling all of its 2,716 rooms.
Cash-rich U.S. corporations are sharply increasing their capital spending this year after scaling back drastically during the economic downturn.
The trend has emerged as a bright spot in a recovery that lately has lost momentum and prompted worries that the U.S. could slip back into recession. Many economists believe business investment could help pick up the slack and eventually spark job growth that lifts the economy from its doldrums.
"People are way too focused on the consumer," says Joseph LaVorgna, chief U.S. economist for Deutsche Bank. "The health of the corporate sector eventually will give way to hiring."

http://www.usatoday.com/money/economy/2010-08-19-recovery19_CV_N.htm?csp=YahooModule_Money

 

[conraddobler]

Looks like the official confirmation happend on Thursday.

There was another squeaker in there but the sources I use never officially confirmed the 2nd signal until Friday.

Here's a good writeup on it.

http://market-ticker.org/archives/2596-Oh-The-Huge-Manatee!-Hindenburg-Omen.html

 

[LVG]

From CD's article - the fine print:

Note that the Hindenburg is not a warning of an imminent crash, even though every market crash in the modern era has been preceded by one.

However, the probability of a greater than 5% move to the downside (from the date of the confirmation) exceeds 70% within the next 120 days (four months); the odds of a panic selloff (defined as a rapid 10% or greater decline) is about 40%, and the odds of a crash (defined as a 20% or greater rapid decline) is approximately 20%.

Second, note that while a confirmed Omen has only failed to predict a significant move about 10% of the time, crashes are still relatively rare - that is, it's still about four out of five times that the market does not crash.

 

[conraddobler]

If you can get your hands on a 20 year chart of the S&P and you know any technical patterns you should see a pretty ominous one.

It's a massive head and shoulders pattern for what it's worth, can take years to play out and it's not fool proof at all but it is huge.

For what it's worth one day if the games being played ever go south and blow up, there will be a lot of awed people, but it could take a long time to ever play out.

One scenario I could see is outright proof someone is rigging the market, forcing them to stop, at that point it's anyone's guess at what kind of carnage would ensue.

I've seen documentation that people claim proves it, IMO it's going on but I've yet to see the SEC or anyone else do anything about it, heck it may even be condoned and approved of or funded by the FED and the government for all I know, people do claim that's going on but they have no real proof.

If they ever get it I'd run for my life in the markets.