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I was born and raised in southern Alberta and graduated from the department of Structural Engineering Technology at S.A.I.T. in Calgary. My background is mainly in construction management although I spent 10 years selling real estate where I gained some very valuable knowledge about how... More
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  • Hindenburg Omen - October 8, 2012 168 comments
    Oct 9, 2012 12:47 AM

    This is the continuation of a discussion on the Hindenburg Omen which was originated by our friend John Lounsbury 3 years ago. Again, we offer a great big "thank you" to John for having maintained this series of instas for over a year and a half... until I finally learned how to create an insta by myself and take this endeavor off his hands. I'm beginning to wonder if this might be the longest running series of instas on Seeking Alpha. Not that that matters of course but I don't think John nor I realized what a monster he'd started a full 3 years ago. Imagine that!

    In any case, the preceding blog can be read here. For further reference, or to read about actual Hindenburg events we have covered including the near misses which occurred in the "week before" and the "day of" the flash crash, the entire series began with John's original post found here.

    At this point I'd like to acknowledge that I'm aware of reports by a few very prominent writers that the HO had issued a signal or two back in July. It did not! One of those highly skilled technical analysts is Mr. Arthur Hill who also writes for StockCharts. At that time he had published on StochCharts an article in which he issued a statement that the Hindenburg Omen had triggered. And of course with the stellar reputation Mr Hill has earned [not tomention the stellar reputation of Stochcharts], few questioned him. Except myself of course... because I was aware that he was using rules that had been changed at least two years previous.

    He had also reported back in December of 2010 that the HO had triggered and he was mistaken at that time as well. I'm pleased to report that Mr. Hill has finally become aware of the rule changes that were put into effect by the creator of the Omen, Mr. Jim Meikka. As a result, the article he'd written for StockCharts in July has been amended and/or replaced with this article which is now correct. Note the new word in its title... "ALMOST". Please understand that in no way am I disparaging the fine work of Mr. Hill. His solid reputation and broad skills at technical analysis speak for themselves. It's just one of those things where the changes instituted by Mr. Meikka were not broadcast to the world. I myself was unaware of these changes for a brief period of time.

    ========Click here for a live and updating blimp image.=========


    In the chart below we see the latest picture of what the NYSE is doing as well as a very easy-to-follow method of monitoring whether or not the Hindenburg Omen is obeying one of its most important rules, that being whether or not its 50 day moving average is rising. As you can see, that moving average turned higher in late July and has been pointing solidly higher every since. As long as the price of the NYSE is above the horizontal orange line thown on the chart below the HO is on-line:

    (click to enlarge)Click here for a live and updating version which I try to keep updated each day.

    Obviously it's been very quiet in here in recent weeks, a reflection of the fact that there has been very little to report about on the HO front. The numbers of new 52 week highs has been rising normally throughout the rally that began in June. But as we enter the final quarter of the year the number of new highs once again begins to fail badly and enters the realm where the HO begins to take notice. In the chart below, we smooth out the statistics a little bit by focusing on the white 7 day moving average of new highs. We only do that for a better 'visual' of what's happening with the new highs but that white moving average line has nothing to do with the inner workings of the Hindenburg Omen itself:

    (click to enlarge)[Click here for a version which updates each day shortly after the market closes.]


    Really, there nothing overly ominous with the chart above other than the fact that the numbers of new highs has begun to deteriorate markedly since the mid September high and now resides right in the HO's danger zone.

    The question staring all of us in the face today is whether or not the correction has run its course and we head higher from here. With the presidential election only 4 weeks away one would have to think that a market collapse from here would be highly unlikely. The chart above, as well as many other charts pertaining to market internals could indeed support the notion of higher prices but since that's not the purpose of the Hindenburg Omen indicator, we won't try to answer that question in this particular room. Besides, ever since Goldman Sachs purchased the rights to "logic" and has banned it's use, nobody knows where the markets are headed. Nobody but god that is and he's not telling... he's too busy at the helm of the FED, carefully guiding the good ship Earth into the iceberg that lies dead ahead. And of course, as was the case for the Titanic, I fear that the "rudder hard-a-port" command is going to arrive way too late.

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Comments (168)
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  • He alive! He's alive!


    Yep, need the bath so the bears (real bears, not market ones) can't track you down and eat you so easily!


    8 Oct 2012, 02:51 PM Reply Like
  • Thanks for keeping this blog going 'rocks... even though every time I see there's a new comment on this blog, I get a shiver down my spine.
    8 Oct 2012, 02:51 PM Reply Like
  • Author’s reply » You're welcome Jon. I can understand why you might get that shiver but I've really tried to tone down the rhetoric over the past year or so because really, a signal from the HO is just a warning. Sure it's a pretty serious warning but it also needs to issue a second signal within 36 days. Also, it doesn't necessarily mean a gigantic crash is coming although that has happened 27% of the time. IOW 73% of the time it hasn't, lol.
    8 Oct 2012, 03:31 PM Reply Like
  • " Nobody but god that is and he's not telling... he's too busy at the helm of the FED, carefully guiding the good ship Earth into the iceberg that lies dead ahead"


    LOL from the gut
    8 Oct 2012, 03:15 PM Reply Like
  • AR: Greetings. Thanks for the new canvas. While I hope we don't have a HO event it's a benefit to see one coming.
    8 Oct 2012, 06:53 PM Reply Like
  • Hi AR,
    Aye Capt. Ben Ahab, Thar she blows. It must be Moby Dollar.
    9 Oct 2012, 04:00 AM Reply Like
  • Author’s reply » Hey there partner. Are you still dazed?


    You just gave me an idea. The other day on another site I wrote a comment in reply to a question from another participant. My response more or less addressed the way I view the currency markets. It was a popular comment because it apparently opened the eyes of some of the other participants. Just for poops and giggles I'm going to copy and paste it below because I really do think this is what we're looking at. The entire concept of looking at currencies relative to each other is a distraction. Here's how that brief conversation went:




    Curiousmind wrote: AR, what do you make of the recent weakness in $A while all the other FX pairs are way stronger against the buck? Do you think it is still working on the triangle you and Mars proposed targeting 0.98 at minimum?




    Albertarocks wrote: Well I'd say the Aussie is behaving exactly as it should in an environment where "risk off" is taking hold. But I think that will be short lived. The Aussie is absolutely in a class of its own because of its involvement in the currency trade casino. So I'd say it's getting dumped partly because of the recent rate cut by the RBA but more so because the big boys must be getting nervous. The USD is falling because Bernanke has essentially lit a match under it. So I guess it's more or less to be expected that the other currencies should rise against the dollar even though they've been set on fire as well. It's just a matter of which kindling is dryer I guess because while all this is going on, all of it is happening inside a basket that has been thrown off a cliff. When we compare currencies against each other, we're actually being distracted... we're being asked to "look at what's happening inside this basket. Pay no never-mind to the fact that it's been tossed into the depths of Mordor." It's a race to the bottom for currencies. How in heck can we expect oil to continue falling while this is going on? We can't. Same ting with gold.


    But to answer your question more directly, "yes" I think the Aussie is behaving exactly as prescribed. Here's a weekly chart that shows what mars and I were in agreement about:




    Ok, back to Stilldazed. Moby Dollar indeed. Recently I've even begun to entertain the idea that maybe, just maybe the entire notion of a deflationary depression might not happen. Unthinkable! Yet the power and arrogance of the central bankers just never ceases to amaze and impress me. Maybe they're so evil, have so much satanic power behind them (the Vatican for example... and I was raised Catholic) that they might even be successful at holding rates down near zero for another 4 years or so? Unthinkable! Yes... that's exactly what Bernankie and Draggy have promised. THEY PROMISED!


    What if every bond holder in the world decided they'd never again buy nor even 'hold' American debt? Could Bernanke and his merry band of Orcs of New York sop them all up? Well... he promised to hold rates at zero until 2015, at which time beyond question he'd just extend that program forever. He has no other choice. If that were to happen, all currencies are doomed. What we'd end up with is an inflationary depression, not a deflationary one. The deflationary one comes later... or not at all. It might 'never' come if the hellish scenario we fear most emerges... a One Realm Currency... aka the ORC.
    9 Oct 2012, 10:37 AM Reply Like
  • Hi AR,
    I like your answer. While I haven't thought of it in quite that way before, it does help explain the shell game going on. I decided long ago that sitting on some physical ounces of silver would be prudent, even though uncomfortable (so lumpy).
    9 Oct 2012, 01:25 PM Reply Like
  • Author’s reply » Definitely silver and gold. As much as you can get your hands on.
    9 Oct 2012, 01:41 PM Reply Like
  • "What if every bond holder in the world decided they'd never again buy nor even 'hold' American debt? Could Bernanke and his merry band of Orcs of New York sop them all up? Well... he promised to hold rates at zero until 2015, at which time beyond question he'd just extend that program forever. He has no other choice. If that were to happen, all currencies are doomed."




    Even a cursory review of history will reveal that all curriencies have always been doomed. The Kings or modern finance ministers cannot resist using the money printing route as a method of fulfilling their false and undeliverable promises.


    The modern example which everyone is most aware of is the German hyperinflation of the 1920's and 30's. If you can spare a day for reading, I can recommend the book When Money Dies. It is not particularly political as it simply recounts, through the experiences of the people and the thinking of the various finance and bank officials, how the currency became worthless.


    None of us can know exactly when it will happen, but the current practices make it seem inevitable, And the painful resolution event is comming closer at an accelerating rate.
    9 Oct 2012, 11:03 PM Reply Like
  • Author’s reply » Just a quick update on what's happening today. As of this moment the number of new highs sits at 86 with 83 as the required minimum. The number of new lows is at 22 with the same 83 req'd. Both seem to be more or less stalled out right here.


    As a matter of interest, there are currently 93 'more' issues that are within 3% of hitting a new 52 week low of their own. So we're definitely right in the zone that the HO needs in order to issue a signal. And of course if it has any chance of doing so today it would most likely be just before the close. Personally I don't think it happens today but with what appears to be some pretty hefty technical damage done today (broken trend lines, etc.) I wouldn't be surprised if the HO were to issue a signal some day this week. Just speculation of course but I don't really see much support under the $NYA (NYSE) at these levels. On the other hand the S&P and AAPL should find some support somewhere around here. And with the election just weeks away one would think that the manipulators will 'surely' goose the market at some point?


    So right now the whole HO story is probably best described as 'interesting' and probably not really not much more than that. Stay tuned though. lol.
    9 Oct 2012, 12:43 PM Reply Like
  • AR, with all of the market variables to watch for trading and investing -- it is a great help to have your latest observations of HO shared. Thanks very much for your time on this.
    9 Oct 2012, 12:49 PM Reply Like
  • Author’s reply » You're quite welcome MJ. It doesn't really take much time, just 'perseverance over' time. Hope you're doing well.
    9 Oct 2012, 02:42 PM Reply Like
  • Author’s reply » For anybody wondering, the highs and lows ended today pretty close to where they seemed to stall out. Final tally was 97 highs and 26 lows. See you tomorrow most likely :-)
    9 Oct 2012, 04:15 PM Reply Like
  • Hello hydrogen ballooners - - -


    In case you missed AR's very timely CRX/SPX article two weeks ago, one place you can get it is at GEI where you can join 900 others who have enjoyed it:
    The graphics in the article are updated daily (click the links) so you can see how early AR identified what may be a trend change (or may be a wave four awaiting a wave five continuation which would mean no trend change yet).
    10 Oct 2012, 01:45 AM Reply Like
  • Thanks for sharing John!


    AR that is one of the most thought-provoking articles I have read in awhile. The interplay between massive global liquidity, commodity scarcity, and what appeared as deflationary forces earlier in the year evolving into inflationary force fields -- are issues we are all trying to watch. Your dynamic graph is a great way to keep a finger on the daily pulse. Many thanks -- again!
    10 Oct 2012, 07:09 AM Reply Like
  • Thanks John. It's a great article ... again. AR has provided a lot of good stuff and I'm glad to see him featured on your site.


    10 Oct 2012, 07:52 AM Reply Like
  • Author’s reply » Haha... thanks for the plug John. That's an interesting stat because that's about the same number of visits that piece has had on my own little blog (891). Some of those visits were directed there from your site as well... people curious about who I am maybe.


    My own blog isn't very widely read and I'm certain a big reason for that is because I don't do very much to promote 'comments' there. Most of my old friends from other Elliott Wave sites are more into chatting and arguing with each other and I just don't like the arguing aspect. It's non-productive and indeed very damaging. We need to focus in friendship. So the 'good guys' among my group of friends find my own little blog to be a rather quiet (lonely?) place. I really only started it in the first place for two reasons. To get away from trolls and secondly, because you darned American people [Mayascribe, Lounsbury, Mark Bern, Andrea Sharp, Mike Ashton and a few others] all went out of your way to convince me that I had some writing talents which, with total honesty, I did not realize I might have had. I certainly didn't have any confidence in it until you kind folks started to reassure me that my writing was reasonably good. I'm dead serious about that.


    And specifically you John, for telling me that if I wrote reasonably good articles you would publish them. I found that very daunting at first but also very, very supportive and encouraging. As you know, after months and months of reneging (nearly two years actually), I finally took the plunge and you published my first effort something like 16-18 months ago. I really want to thank you publicly (all of you) for your encouragement and support because without it I guarantee you, I absolutely would have NEVER written any article of any kind. But now I really enjoy it, lol. Thanks to all of you.


    On a side note, there 'is' one article on my blog that for some reason or another took off the first day I published it and it has just continued to be a hot article for months and months on end. To this very day it is still very popular and I don't particularly know why. It will hit 10,000 reads this week or next.


    It's the short piece that discusses the fact that the correlation between the American dollar and equities in fact had been non-existent when everybody thought the dollar had to fall in order for equities to rise. That has not been true at all over the past 5 years. However, at the time I published that article ( I speculated that that was about to change. I was predicting that from that time forward the relationship between the US currency and US equities would become permanently inverse. As of today, 9 months later, that has indeed been the case.


    From the FWIW files, lol.
    10 Oct 2012, 02:58 PM Reply Like
  • Author’s reply » Well whadaya know? The numbers of new highs and new lows are pretty much dead even today. 38 and 33 respectively. Of course neither of those is high enough to make much noise but the HO is certainly quivering these days. But really that's nothing more than just a "heads up" for now. The HO may not trigger at all if the markets were to scoot higher from here. And that would be just fine with us, right? I suspect they will if for no other reason than I think the powers-that-be would like the country to be in as good a mood as possible heading into the election, an election which as always, means nothing.


    I really do love the fact that the HO 'does not' go off very darned often. It's just so sad that other analysts report that it has gone off when in fact it hadn't. That serves to give the HO a bad rep that it doesn't deserve.
    10 Oct 2012, 02:31 PM Reply Like
  • Author’s reply » At the end of the day the numbers came in at 43 and 35 which might be considered as not necessarily 'reasonably close' but definitely noteworthy.
    10 Oct 2012, 04:24 PM Reply Like
  • Author’s reply » Grab a coffee or something Dan, You're replying to 'yourself'. lol
    10 Oct 2012, 04:25 PM Reply Like
  • But we're eavesdropping. Watch what you say! ;-)) The Feds might be listening too!


    10 Oct 2012, 04:44 PM Reply Like
  • Author’s reply » I hope they are. They could certainly stand to learn a thing or two :-)
    10 Oct 2012, 04:55 PM Reply Like
  • Yup, the Obama Plunge Prevention Team (PVT) had certainly been on full alert. They think they are willing, able, and qualified to do THEIR job. LOL!
    10 Oct 2012, 05:11 PM Reply Like
  • Yeah Rocks...HTL is correct, we're eavesdropping, tin cups, strings and all.


    Congrats on your GEI Article! Well done.


    John: Loving your hydrogen balloon salutation. There's another one going up Sunday, to 23 or 24 miles, from where a daredevil will plunge back to earth at speeds in excess of mach 1.


    In case any of you fine folks are interested in seeing this death defying act of record breaking courage, here's a link where you can watch it live:



    Something funny in there about this guy taking the greatest leap of all time, and if and when the HO triggers. Maybe Felix Baumgartner could be the HO's mascot.
    10 Oct 2012, 05:21 PM Reply Like
  • Author’s reply » Wow! Where have I been? I hadn't even heard of this event! Man does it ever remind me of Evil Knievel's jump over the Snake River Canyon. We waited for weeks, seemingly for an eternity, until the day finally arrived when the stunt aired live on TV. What a flop that one was! To this day I'm still convinced that Knievel's rocket launch was planned to end in the spectacular failure that it was. Otherwise I suspect he would have perished and I'm convinced that Knievel knew it too. Nonetheless I appreciated his skill at self-promotion and ingenious money making schemes.


    Thanks for that link Maya. I'm definitely going to share it with others. But I'll make one prediction: Mr. Baumgartner is going to get up there at altitude... he's going to open the door to that capsule and he's gonna discover that he's afraid of heights. He'll make the safer decision like Mr. Knievel did and in the name of survival... he 'won't jump', lol.


    Joking aside, of course I wish him the best of success and godspeed. Wait... in this case "godspeed" might not be the best thing to be wishing upon a guy either. lol


    On a side-note, I jumped out of an airplane to commemorate my 30th birthday and that was from only 3000 ft. I can tell ya, that was spooky enough for me. Felix will be jumping from 40 times that altitude. Funny thing is... the end result would be the same if the chute fails to open.
    10 Oct 2012, 06:26 PM Reply Like
  • He must be going to wear a heated, insulated suit. It would be very cold at that altitude! If anything malfunctions on the way down, not just the chute, he could be toast (or maybe jam is a better analogy).
    11 Oct 2012, 01:28 PM Reply Like
  • IIRC, adiabatic lapse rate is 3.5 degrees Fahrenheit for each 1000 feet.


    "Very cold" would be an understatement.


    11 Oct 2012, 01:42 PM Reply Like
  • At speeds above Mach 1 will wind chill be replaced by frictional heatiing?
    12 Oct 2012, 02:35 AM Reply Like
  • His suit needs to be not only heavily insulated, but it must come with a heat resistant outer layer. If not, the jam analogy won't hold up. He actually will be toast!
    12 Oct 2012, 11:25 AM Reply Like
  • Does he have magic underwear?
    12 Oct 2012, 02:14 PM Reply Like
  • -- At speeds above Mach 1 will wind chill be replaced by frictional heatiing?


    I only wonder if at speeds above Mach 1 you can hear yourself scream in terror.
    12 Oct 2012, 02:35 PM Reply Like
  • Robert: I just hope that 50 story high balloon doesn't land on your house!
    12 Oct 2012, 02:37 PM Reply Like
  • Maya: Greetings. That would be a real drag. If the wind was high enough it could drag away half the neighborhood! LOL. Have a great week end all.
    12 Oct 2012, 02:40 PM Reply Like
  • He'll be wearing speedos, of course!
    12 Oct 2012, 04:31 PM Reply Like
  • More fun about this going on over in the Axion Power Concentrator. Loved iindelco's retort to John Petersen's comment.


    John Petersen: I wonder if he's got one of those big white landing target crosses that he wants to hit?


    iindelco: Yeah, The Air Force paid for the cross. After their last 2 mach 20 failures they wanted a success. So they painted a cross on the bottom of his foot so they can all jump up and high five yelling "Right on target". :))
    12 Oct 2012, 02:45 PM Reply Like
  • Par for the course these days.
    12 Oct 2012, 02:50 PM Reply Like


    Just an update since no doubt there will be some people who are curious about what's happening with the HO after a sell-off like we're seeing right now.


    As of this moment there are 88 new highs registered with 85 being the miminun nubmer required today. Someone remidn me to get this keybaord fixed. It's a bit stikcey.


    So far there have been 33 new lows with 85 also being the required minimum. There are also 118 'more' stocks that are within 3% of hitting a new 52 week low and 68 that are within 2%. 35 of them are within 1% of a new low. These stats are courtesy of a scan engine I use at StockCharts so I'm only 'assuming' it's accurate. I don't have any reason to expect that it isn't.


    So the HO is definitely humming right now and it's possible it will issue a signal later today. A rally in the final two hours would probably stop that from happening though. We'll see, but we're definitely in dangerous waters right here with the market being pretty darned polarized. However, I kind of doubt we're going to see a signal today but that's really just a guess based on the fact that the market is way, way oversold and looks due for a bounce. BUT... if that bounce doesn't appear soon... stay tuned.


    For any folks out there who haven't yet read about what it all means when the HO issues a signal, I suggest you read the short article I wrote on that topic. Since it was published as a 'page' and not as a 'post', it isn't dated. So I don't even know when I wrote that piece but I'd guess it was probably about in January. It's intended to lay all the cards on the table and let people know exactly what to expect. That piece should actually calm people down rather than get them too rattled. In any case it's definitely better to know ahead of time what we might expect to see when the HO goes off.
    19 Oct 2012, 02:15 PM Reply Like
  • This is the first time in a while that the Fed balance sheet has shown a slight tick upward. In the past, growth in the Fed balance sheet has meant risk-on. If that pattern holds, the sell off could just be a buying opportunity.

    19 Oct 2012, 02:28 PM Reply Like
  • Author’s reply » I hear ya jhoop. Up until last night there was a lot of discussion among the Elliott Wave specialists as well where they were seeing the possibility for new highs. But we'll have to see what kind of damage is done after this trading session ends. For example, the low of 1425.52 on Oct. 12th is critically important. If the S&P drops below that level it would imply that the correction off the highs was 'not' an 'abc' lower, but something far more sinister.


    There's also quite a bit of debate about the signals that the currency markets are sending, particularly the action in the Australian dollar and it's ratio with the Yen. That pair has been incredibly accurate at measuring the appetite for risk. I study that one a lot and to be honest it doesn't look overly bearish at all. Also, and I consider this to be 'very' important from the aspect of what to expect on the topic of 'inflation'... the $CRX seems to have turned higher although it's too early to tell if it's just an upward correction or something more impulsive. But if it continues higher, that makes a 'no bones about it' case that inflation is returning with a vengeance. And of course that would imply higher prices for equities, probably 'much higher'. I wrote another article on that topic just a month ago that turned out to be quite popular. If you're interested you can see it here:


    It's all at a critical point right about here. I don't doubt for a minute that the FED is determined to inflate the world out of debt if it can. They're determined to ruin the dollar. So I'm not sure what in hell I'd think if the HO went off in light of Bernanke's promise to buy bonds basically forever. Man... we're talking about $4,000 gold and $400 for a loaf of bread if that bugger doesn't cut it out.
    19 Oct 2012, 02:47 PM Reply Like
  • pre QEi anticipation run up seems heavier this round vs previous rounds.
    thanks for the link hoop - the balance sheet fall 08 move higher, peaking nov/dec 2008, didn't boost equities 1st qtr 09 - but extraordinary fear over rode early 09... I see the correlations starting mid summer 09. Earnings were on the mat at that time - compressing now...
    If this gets much uglier, margin calls and stop loss sales could cascade quickly through resistance.
    19 Oct 2012, 03:15 PM Reply Like
  • "I see the correlations starting mid summer 09"


    Fiscal "stimulus" was beginning around that time as well. We don't have that this time, so that needs to be factored in as well. Fiscal "stimulus" also creates risk-on, because it is a consumption subsidy just like QE. Fiscal and monetary "stimulus" are like blowing on a fire. You can definitely heat it up, but if there is no more wood being added (real gains in productivity), then heating up the coals with more oxygen just expends the wood faster (espcially if you are passing laws that punish the rich for investing in wood gathering).


    The economic data is far from good, but its also not a disaster. So, I am wondering if BB's blowing on the fire with QEi can't be sustained for 18 mos or so. After all he isn't really blowing all that hard ($40 billion a month we are told), so I tend to lean towards a slow melt up in the markets, interspersed with days like today.


    The wild cards are the elections and Fiscal Cliff headlines. Also, in 2013 there are coming some real changes to the subsidy mix. Aspects of Dodd Frank are kicking in (increases in regulations on banks is like raising the FF rate or shrinking the Feds balance sheet - their deflationary) and Obamacare taxes and rules kicking in. These are deflationary possibilities, and that could mean severe pullbacks in asset prices. Before that, I could see the S&P breaking 1500 and the US 10 yr nudging 2%.


    Then if the deflationary policies in 2013 aren't dealt with, then it will be risk-off again, and I could see the S&P retreating back under 1300 and the 10 yr getting into the 1.20s. I would also expect one negative quarter of GDP, say -.6.
    19 Oct 2012, 03:32 PM Reply Like
  • DigDeep - This is just a reminder, but since Apple did buy the naming rights to the current QE from the Fed we are supposed to refer to it as iQE! LOL! Just kidding, I hope.
    19 Oct 2012, 10:04 PM Reply Like
  • LMAO. Very funny. Thanks 'rocks :-)
    19 Oct 2012, 05:36 PM Reply Like
  • Author’s reply » Good morning to all my friends, bakers and English people out there in TV land. Here's just a little recap of what's been going on with the HO as of late.


    Over the past couple of days I have just glanced at the numbers for the new highs and lows and more or less just moved along because the numbers just weren't there for any HO signal. What has been interesting though is that although the numbers have been 'uninterestingly' low, the number of new lows being hit lately have started to exceed those for new highs. I didn't even bother to memorize the stats yesterday but they would have been something similar to 44 new lows and 30 new highs. Something like that.


    So far today that pattern is repeating with 25 new highs being hit and 40 new lows. Neither of those stats is close to HO requirements yet but as the day progresses of course they will both grow. Generally speaking I think we could summarize it kind of like this: "The market is definitely showing that it's polarized with more new lows being attained now than new highs. That latter factor could be characterized as being a much more negative condition than usual. But the polarity so far is not to the extremes that the HO is looking for."


    One thing that is noteworthy is the fact that the number of stocks that are getting closer and closer to hitting new 52 week lows continues to grow. Normally that's the factor that's 'missing' from allowing an HO signal. We usually see enough highs but the number of required lows is insufficient most of the time. That seems to no longer be the case as evidenced by these changes over the past few days.


    Stocks within 3% of a new low Last Friday = 118. Today = 140.
    Stocks within 2% of a new low Last Friday = 68. Today = 86
    Stocks within 1% of a new low Last Friday = 35. Today = 50


    The numbers of stocks that are opposite (that are within 2 or 3% of hitting a new high) are always more than sufficient. For example, today there are 385 stocks that are within 2% of hitting a new 52 week high. This is normal.


    But the stats about the stocks that are getting close to hitting a new low are only 'useful information'. They don't imply that the HO is going to issue a signal, but only make us aware that that one factor that is usually missing now appears to be more 'available'.


    From my own TA perspective, I'll go on record as saying that even though the action since the Sept. 14th high has been just crazy, with bigger swings in each direction than any of us like, the pattern is still undecided. Personally, I'm not the hopelessly lost bear that I used to be. That epiphany has come about for the simple reason that I have finally been convinced that the bankers of the world are much, much more powerful and far, far dirtier and selfish than I'd even conceived as being possible. So although I fully understand "why" a deflationary scenario is possible and most likely "inevitable", I don't hold the patent on "when" that deflationary event might occur. For all I know the mafia might be able to delay a severe market decline for a few years. In theory, possibly even "forever", as long as they can continue to find junk to purchase in order to justify more printing.


    I'm not making any kind of prediction about the market's future because obviously nobody knows what their ultimate agenda is. But I'll put it this way... IF they are able to delay the deflationary event "forever", that of course means complete and total destruction of every major currency in the world. They would then come to the rescue of an inflation-ravaged global society by issuing a One Realm Currency, to be known thereafter as the ORC. And of course, the "New World Order" has indeed been on their agenda for decades, if not centuries. So it just remains to be seen if they can pull that off. If they do I'm not going to have any more children.


    Bottom line as pertains more to the more immediate future, I'd say that the possibility of a 'rip-the-bears'-faces off' rally from here is totally possible. A lot of technical damage has been done though, such as major trend lines being broken, etc. So the coming bounce should give us a great clue about what the ultimate outcome is going to be. It could go either way IMO. I definitely want to say though, that I'm exceedingly suspicious of bad things happening right after the election. For example, about two months ago Obama shamelessly begged Germany to ensure that Greece would not leave the Eurozone "until after my election". God... how pathetic that is. But I definitely think it's a whole new ball game the moment that election is over. From the FWIW files.


    Sorry for the long post, but really I haven't been doing any comments 'anywhere' for the past couple of weeks. I guess I was a bit overdue and you poor folks just happened to be the innocent victims of the inevitable verbal diarrhea that just seems to happen from time to time. One effective strategy might be to go long Depends.
    23 Oct 2012, 12:53 PM Reply Like
  • -- I guess I was a bit overdue and you poor folks just happened to be the innocent victims of the inevitable verbal diarrhea that just seems to happen from time to time. One effective strategy might be to go long Depends.


    Hilarious, Rocks!


    I agree with your assertion that it may be a whole new ballgame post election, and also see some technicals turning over. But as long as the Dragi-Bernanke printing presses keep on printing, I'm hesitant to believe any rip your face off plummet from the summit will "be allowed" to occur.


    I do believe the markets will continue contracting sporadically [like today] until the election is over.


    23 Oct 2012, 01:14 PM Reply Like
  • With the negative (weaker) forward guidance, we may be finally getting a market more connected to reality ... until the next Fed pronouncement.


    OTOH, all the addicts are probably already calculating the odds and nature of the next QE-infinity++ since each has gotten weaker and weaker in it's positive effects on any measurable instrument or data set.


    23 Oct 2012, 01:30 PM Reply Like
  • Author’s reply » At the end of the day the numbers for the new highs and lows ended up at 36 and 41 respectively.
    23 Oct 2012, 04:10 PM Reply Like
  • Fiscal clift means gains will be taxed higher next year so how many folks are gonna sell out at or near year end if the clift is still hanging over everyone head.


    Tax issues matter in proper financial planning and this would be a big thas to consider that in calculating the situation here. I do not know how much weight to give it but it should be considered.
    23 Oct 2012, 05:30 PM Reply Like
  • Friends , bakers and English people , I love it. It's almost like an episode of 'The Thick of It'. You're not really the Canadian version of Malcolm Tucker, are you rocks?
    That missing factor of 52 week lows is moving higher by the day.
    23 Oct 2012, 05:45 PM Reply Like
  • Author’s reply » Haha, I'm glad you liked that line KD. But I have to admit that I don't know who Malcom Tucker is so I'm unable to answer your question. Somehow I've got the feeling my face should be turning a bit red now?


    Yes, that missing factor is becoming more and more available.
    23 Oct 2012, 06:14 PM Reply Like
  • Thanks Rocks. This is likely to be a very interesting lame duck session. Which begs the question of how to profit from it? An old Chinese curse: May you live in interesting times!
    23 Oct 2012, 05:50 PM Reply Like
  • Author’s reply » You're welcome as always RBF. As I was commenting on a different site today, I don't think I've ever been as confused about the markets as I am right now. In the last hour I literally removed every single dollar of my account off the market. I just can't stand it. This crazy-assed thing could go absolutely anywhere and none of us has a clue which direction that might be. I think we're all sitting ducks right now and we have the Fed and the Fed alone to thank for that because it's they who are rigging the markets and it is they who have rigged the election... whichever way it turns out. There is absolutely no question in my mind that the outcome was determined months ago. Of that I am 100% certain.


    I was just thinking about the fact that I haven't been drunk in 5 years. If I thought it would help I'd go get pissed to the eyeballs right about now. But knowing that won't help... I think I'll just drink a jug of orange juice and then go out and get into a car accident. Preferably with a cop car if I can find one. That way the cops can't charge me for drunken driving and I'll be the big winner. For some strange reason doing something like that makes a lot more sense to me than the stock markets do right now.
    23 Oct 2012, 06:26 PM Reply Like
  • AR,
    I thought I was the only one dazed and confused. :-)
    23 Oct 2012, 06:28 PM Reply Like
  • Author’s reply » Nope!


    23 Oct 2012, 07:19 PM Reply Like
  • I second that!!!
    24 Oct 2012, 10:25 AM Reply Like
  • I am still dazed but I have a strong gut feeling that we're heading lower within the next few months. Whether BO wins or Romney, after the election is over, those in power outside the US are free to do what ever they like (no more need to prop anything up to help their buddy). If BO loses I expect him to play hardball with the fiscal cliff issues and leave it all for Romney. IOW, he'll not sign anything to spite Romney and let us fall off the cliff. If BO gets re-elected, I suspect he might play hardball with Republicans to get what he wants even if it means another downgrade.


    I hope I'm wrong because I think Romney wins and we find out if BO is going to be vindictive. He will, of course, blame Romney for everything bad that may befall the nation as a result of his inaction.
    24 Oct 2012, 12:06 PM Reply Like
  • Yes, his new mantra will be "Romneys fault".
    25 Oct 2012, 12:54 PM Reply Like
  • Author’s reply » Just a quick note to point out that there were 67 new highs registered today and 42 new lows. I guess we could say that was about as close a shave as we've seen in quite a while although we certainly saw closer ones the week before the flash crash. But the market seems to be losing steam to the downside and it could certainly put in a pop upward before the week is over. That should take some pressure off the HO for the time being. Not necessarily though. It's impossible to say but at least we know that the HO is pretty tingly right now. It's just a warning for now I'd say.
    24 Oct 2012, 04:21 PM Reply Like
  • I wouldn't expect a signal unless we get a higher opening, filling the new high requirement early, with a bad earnings report leaked during the trading session that takes the market back down to a loss for the day. Otherwise, I suspect we need to trade sideways for awhile to let the polarity rise a little more before we are likely to get one. Just my thoughts. So, watch the darn thing go off tomorrow with little movement!
    24 Oct 2012, 05:27 PM Reply Like
  • Author’s reply » Holy smokes, I just noticed something that I thought was going to be more or less a non-issue today so I didn't mention it in the last comment. It's just that the numbers of stocks that are getting closer to hitting a new low is growing steadily. IOW, even though the market appears to be calming down, internally it is continuing to worsen.


    Mid-day I checked to see how many stocks were within 1-3% of hitting a new low of their own. At that hour the numbers were all higher than those I'd posted for last Friday but not by much.


    But after the close I checked them again and there has been quite a shift... to more bearish. All the numbers below are 'over and above' the actual new highs and lows that were already attained at the time and 'in the books'.


    Stocks within 3% of new low:
    last Friday = 118
    Yesterday = 140
    today = 146


    Stocks within 2% of new low:
    last Friday = 68
    Yesterday = 86
    today = 106


    Stocks within 1% of new low:
    last Friday = 35
    Yesterday = 50
    today = 54


    This is not to imply anything other than to point out that the one factor that normally denies a signal from the HO, the number of new 52 week lows, is definitely attainable right now. And apparently getting more attainabler with each passing day. "Attainabler" is a new word, as are my other recent favorites, "exponentiously" and "unfortunously").


    Hope you're having a great day.
    24 Oct 2012, 05:37 PM Reply Like
  • Recently my favorite word has been "expletive", which keeps getting deleted! :-))


    I doubt any of them are new though.


    24 Oct 2012, 05:43 PM Reply Like
  • We have been inching towards the 200MA. Keep your powder dry!
    24 Oct 2012, 05:55 PM Reply Like
  • HTL,
    Thanks for shipping my order for a case of TFHs. Thanks also for the free 2013 model which I am wearing in my pic for others to see.
    24 Oct 2012, 08:22 PM Reply Like
  • Stilldazed: Thanks. We worked really, really hard on that new model. Unfortunately, before mass production ensued we failed to realize we had designed in a potential confusion with a phallic symbol.


    We sincerely hope that the additional derision to be suffered related to this oversight doesn't overwhelm our customers' ability to stand up under the already distressing level of scorn, disbelief and laughter that our customer's suffer.


    If the strain is too much, we will gladly exchange it for an older model - our customers' satisfaction is our only goal ... except for those who are "moles" working against ... let me check my files ... OK. You're good. Call the office for an RMA # if you decide to go back.


    25 Oct 2012, 08:07 AM Reply Like
  • HTL,
    Now that you mention it I see the dilemma. However, with Halloween coming I thought I would put a white ribbon in the peak of the hat and have an instant Hershey's Kiss(TM) costume.
    25 Oct 2012, 01:01 PM Reply Like
  • Still: I once won second place in a Halloween costume contest dressed as a "wind-blown man." Shoe laces outstretched, tie flung over my shoulder, money and cigarettes flying out of my pockets, hair slicked straight out... Perfect costume this year.


    Sell Hershey stock now! Sandy is going to wreak havoc on the east coast Halloween experience.
    25 Oct 2012, 01:11 PM Reply Like
  • Cool idea for costume.
    25 Oct 2012, 01:47 PM Reply Like
  • Just saw this today for you costume lovers


    Nun in Cab
    A nun gets into the cab and the cab driver won't stop staring at her.
    She asks him why he is staring.
    He replies: "I have a question to ask you, but I don't want to offend you".


    She answers, "My son, you cannot offend me. When you're as old as I am and have been a nun as long as I have, you get a chance to see and hear just about everything. I'm sure that there's nothing you could say or ask that I would find offensive."


    "Well, I've always had a fantasy to have a nun kiss me."
    She responds, "Well, let's see what we can do about that:
    #1, you have to be single and
    #2, you must be Catholic."
    The cab driver is very excited and says, "Yes! I'm single and Catholic!"


    "OK" the nun says.
    "Pull into the next alley."
    The nun fulfills his fantasy with a kiss that would make a hooker blush.
    But when they get back on the road, the cab driver starts crying.


    "My dear child," said the nun, "why are you crying?"


    "Forgive me but I've sinned. I lied.
    I must confess, I'm married and I'm Jewish."
    The nun says, "That's OK, my name is Kevin and I'm going to a Halloween party."
    25 Oct 2012, 03:07 PM Reply Like
  • Author’s reply » Great joke DigDeep, thanks. And speaking of great costumes, here's what just has to be the best costume for a dog ever created:
    25 Oct 2012, 03:43 PM Reply Like
  • AR: Greetings. Great costume for the dog. LOL.
    26 Oct 2012, 11:22 AM Reply Like
  • Author’s reply » The number of new 52 week highs required for the HO to issue a signal has been reached. The number of new lows is nearly half way there with 37 on the books so far. As well, the following numbers are once again higher than those posted yesterday. Stocks within X% of hitting a new 52 week low of their own.


    3% = 155
    2% = 104
    1% = 49


    So I'd have to say that if the market were to hit the skids from here we're probably going to see the HO go off today. But of course the Fed could fill their pockets with AAPLs this afternoon and save the world yet again. On a less cynical note, I'd have to guess that if the markets 'do not' move much lower from here the HO probably won't issue a signal, although it 'still could'. Less likely though if the markets just meander right around here or head higher.
    25 Oct 2012, 12:33 PM Reply Like
  • AR: Gary Kaminsky does a great job - one of the best additions CNBC ever made IMO.


    Anyway, the FED wouldn't have to buy just Apple. They could "diversify their portfolio" and make a profit to return to the U.S. Government.



    25 Oct 2012, 12:42 PM Reply Like
  • Author’s reply » Well we're not going to see a signal today friends and bankers, but it's sure getting close. With 10 minutes left to go the number of new highs still sits right about where it was earlier, currently at 92. And the number of new lows more or less stalled at 38 but crept up to 42 in the past five minutes. With so many stocks willing to participate on the down side I'd say this is getting pretty darned close to "near miss" territory. Closest yet this week. All I can say is stay tuned and we'll see what happens tomorrow. No doubt the AAPL earnings thing is going to give the markets (all of 'em) a real kick in the pants one way or the other... about 10 minutes from now.
    25 Oct 2012, 03:51 PM Reply Like
  • Author’s reply » Here's a link to a page that will update (you gotta hit the 'update' link though) as the AAPL story unfolds:
    25 Oct 2012, 04:12 PM Reply Like
  • APPL announcement was disappointing! I expect AAPL share price to fall on Friday. A miss is a miss and the miss on iPads was significant. If AAPL is cannibalizing one one of its existing products (iPad) with a new product (iPad mini) without gaining much market share it could be the beginning of the end of the big run in share price. It may take awhile for most AAPL bulls to figure it out (including myself). I think there is another good run up after the dust settles and plan to be a buyer for the short term. I'll watch for some mid-quarter guidance from AAPL about how sales are going before I make a final decision about my core holdings.
    25 Oct 2012, 06:28 PM Reply Like
  • Author’s reply » Hi gang. Just an update here. So far the numbers are looking like they're headed for the range that the HO is looking for. With 3 hours to go the number of new highs sits at 46 and the new lows at 32. Not quite neck and neck but they're both headed toward the minimum requirement of 83. There are also plenty of other stocks within range of striking a new 52 week low of their own, so it's definitely a possibility that the HO will go off some day soon. Perhaps today, maybe Monday, who knows? But I'll add more comments here today if necessary.
    26 Oct 2012, 01:07 PM Reply Like
  • Just great, Rocks. With the mean of the European Hurricane model, and the US model, having the eye of Hurricane Sandy, A.K.A., "Frankenstorm" coming right over my roof, I'll likely be without power on Monday.


    Thanks for the update.
    26 Oct 2012, 01:30 PM Reply Like
  • Author’s reply » Oh Gawd! I wasn't even aware of Sandy until you mentioned it, so I just read about it now. I can tell ya man, that's one thing I would NOT want to experience. We have our share of storms up here in the great white north but very few of them pack "violence" like a hurricane. As bad as our types of storms are sometimes, they aren't even scary compared to a hurricane... just a cold damned nuisance in the winter time or a rainy lightening-filled light show in the summer. After winter storms have passed all we have to do is get out there and start shoveling... and see if we can find our cars within the next 7 days. We only have to search for our cars... not our houses. I'd say that compared to a hurricane like Sandy (or any hurricane for that matter) our worst winter storms could probably be referred to as "fun". Like I say, it would scare the hell out of me to be in a hurricane. I wish all of you the very best with that monster. Stay safe buddy.
    26 Oct 2012, 01:51 PM Reply Like
  • Thanks. Will try to oblige!


    This storm is shaping up to be a doozie, reminding me of Hurricane Agnes, when during a break in the storm, my pop and I scurried down to the printing machinery manufacturing plant he worked at, located not far from the Allegheny River. Couldn't get near the building due to the flooding. Out in the middle of the river we saw a Gulf gas station, bays and all, gliding downstream.


    This storm is potentially tracking the same way.


    What I'm more concerned about, and currently it's not getting much attention on the MSM, is that a jet stream of Canadian cold air will whip in behind the storm, and possibly deposit feet of heavy, wet snow from the Great Lakes to all the way down the Appalacias.


    I've never stowed away my wrought iron porch chairs and tables, other garden art stuff...that may wind up down the street or inside my neighbor's living room, so early in the fall season.


    Hopefully, I'm over reacting.


    I wish I owned a piece of the Weather Channel today. Of course, when 10s of millions lose power, as they are forecasting, their ratings will drop.
    26 Oct 2012, 02:13 PM Reply Like
  • Author’s reply » Environment Canada is tracking it as well since it's likely to have an impact on our maritime provinces. But there are better, more 'live' tracking services out there:


    ... like NOAA:
    26 Oct 2012, 02:49 PM Reply Like
  • Maya, I was in Japan in 1990 when Typhoon Flo went right over my house. It was over 1,500 miles wide at its greatest point. Classified as a super typhoon. Needless to say the eye passing 25 miles north of me was nearly like a direct hit.


    It was one hell of a ride to say the least. The damage afterward was beyond belief. Cement telephone poles litteraly twisted and shattered. I would say the trees are your biggest threat this weekend.



    typhoon flo at wikipedia
    26 Oct 2012, 05:23 PM Reply Like
  • I remember riding out a category 2 (Harriet) with peak winds of 105 mph back in 1971 while I was in Vietnam. We first crawled under one of the buildings in the crawl space. Then we heard most of the building get torn off, so we crawled to a bunker about 20 yards away. The first guy across took the end of a rope and the rest of us followed the rope. The bunker had large holes, like windows, near the top so we got soaked, but the walls never quivered. When we came out as the eye passed over us (about 45 minutes) we looked back at where the building we had been hiding under. It was completely gone! I found a guy in some wreckage during the eye who had been asleep when it started. We pulled him out and took him to the bunker. In the end, the only billet (sleep quarters for those who might not know) that was left standing unharmed was mine. Apparently we were the only ones to take any precautions. It was an interesting experience.


    But I have a hard time comprehending what a cat 5 would be like since that little cat 2 I went through was already very humbling in nature. If I remember correctly a cat 5 has sustained winds around 150 mph. Look, Mom, I can fly!
    26 Oct 2012, 11:52 PM Reply Like
  • Author’s reply » Well I gotta run Maya. Right now the number of new highs and lows have stalled out at 59 and 35 respectively. If you want to keep your eye on it until the close, here's the official source. I don't think there's any chance of a signal today now because we'd need to see 84 of each. But in the event you want to check it out, the stats we need are in the third panel from the top:


    Have a great weekend buddy... or as best you can with the knowledge about what is apparently coming your way. Keep smilin'.
    26 Oct 2012, 03:13 PM Reply Like
  • Yeah, I just finished with the leaves for now as we expect a couple of days of wind and heavy rain down here as well (Virginia). I'm sure my neighbors leaves will end up in my yard, though, and I'll just have to do it all over again in about a week. I'm looking out my front window and count 85 mature hardwood trees (mostly oak) in the front "yard" and there are many, many more in the back and along the sides of the house. If leaves were dollars I'd be a billionaire many times over!
    26 Oct 2012, 03:25 PM Reply Like
  • Rocks and fellow HO disciples !
    It has come to my attention that you may not yet have enjoyed the wonderful world of Malcolm Tucker.
    At great personal risk, I have decided to publish these links.






    Malcolm Tucker gets a birthday cake



    The Caledonian Mafia



    In The Loop

    29 Oct 2012, 06:30 PM Reply Like
  • Author’s reply » Well first things first. Did everybody survive Sandy ok? I sure hope so. I'm curious to know which of you saw the effects of it and who might have been too close for comfort. The first name that comes to mind is Maya because he mentioned it might pass pretty close to his house. What was it like Maya? Maya? Maya... are you there?


    And the second item is the HO and the fact that the markets are 'still' hovering right in its ballpark. We could definitely see a signal over the next few days if this keeps up. It wouldn't be the end of the world at all if it happens because keep in mind, an HO signal is just a warning to get out of Dodge because the market is likely to fall some more. How much? We don't know 'how much' but not necessarily a whole lot. It 'might be a big decline' but it doesn't have to be. The HO signal is just a heads up to take the safe route and stand aside at least. Stay tuned friends because at the moment we're kind of half way there with over 4 hours to go in the trading day.


    96 highs (85 required min.)
    36 lows (85 required min.)
    31 Oct 2012, 11:17 AM Reply Like
  • Check. But wasn't bullseyed. Eye passed about 40 miles south of here. My home survived damage free. Last year, when I did a little remodeling, I had the carpenter get up on the roof and apply new caulking to the skylights. Other residents in my little cluster home property experienced leakage. That was a good move, there.


    Across the street, a school had some of its roof ripped off. The street sign at my corner is down. Stop sign, gone.


    Power was out for about 19 hours. Somehow, my favored watering hole retained power and boy did they get crushed. Many pals lost power. One friend, who had power at his home, lost it at his high end restaurant. Across the street, another friend, whose pizza shop retained power, got crushed, and had to close because they ran out of everything by 4PM. Local McDonalds had a line of cars all the way around back and out onto Rt. 30. Starbuck's business down the road was brisk.


    The were winners and losers from Sandy.


    Friend of mine bought a beach front home in Ocean City, NJ, earlier this year. He fears the worst. I went into the OC website, and it looks like his home is pretty much gone. Weather Channel seems to confirm. Haven't yet heard back from him.


    Drove around surveying yesterday, and pretty much at every turn damage was seen. Seems a bazillion trees were down. Many roads closed off. I came down one leaf and twig littered street and throttled up as I passed under a downed tree with about a 2.5 foot diameter, which was leaning low, using the remains of its root ball and a trunk line on the other side of the road as support. Clearance was about four feet. Eerie feeling doing that.


    Perhaps the most amazing thing I noticed driving around was how many election signs made it through the storm.


    Never before have I done as much texting as two days ago. Easily over a hundred.


    Standing in my candlelit kitchen during the storm, I heard what sounded like a rapid staccato of metallic firecrackers going off. It was the vent flap above my over the counter oven going berserk, "fwapping." Damned near jumped out of my Crocs.


    I was lucky. Millions of others, sadly, were not.
    31 Oct 2012, 02:20 PM Reply Like
  • Author’s reply » I felt somehow guilty giving your comment a "like".


    I'm glad to hear you came out of it in one piece buddy. So sorry to read about your friend's home in Ocean City though. Man that's rough. Let's hope we don't see any more of those damned hurricane things.


    On the HO front there are 116 new highs and 48 new lows. Although not 'real close', this is as close as the HO has come to issuing a signal in quite some time. FWIW.
    31 Oct 2012, 03:17 PM Reply Like
  • Author’s reply » The NYSE ended up producing 52 new 52 week lows. Since the required number of new highs was attained I can safely say that this was indeed the closest shave we've seen in a long time. On a side note, if there was any such thing as a HO indicator for the NASDAQ (which there isn't), it would have gone off today. It might have even gone off last week, I dunno because I wasn't paying attention to that since there is no HO for that index. Nonetheless, the message is the same... the NAS Composite is just as polarized as the entire NYSE is. To be more specific, there are exactly as many new 52 week lows in the COMPQ right now as there are new 52 week highs (78 each). That is an extremely "unbullish" statistic.
    31 Oct 2012, 04:04 PM Reply Like
  • "To be more specific, there are exactly as many new 52 week lows in the COMPQ right now as there are new 52 week highs (78 each). That is an extremely "unbullish" statistic."


    That is a very interesting point. Perhaps the NASDAQ will lead the correction! Something to watch as it may be somewhat predictive of what lay in store for other indexes. Just a thought.
    31 Oct 2012, 06:17 PM Reply Like
  • I have always heard the Russell 2K is the best predictive market.
    1 Nov 2012, 07:57 AM Reply Like
  • Author’s reply » Yup... if the biggest players are feeling frisky and quite comfortable in taking risk they pile their money into the Russell so the R2K gains more percentage points during upswings than the S&P or the DOW. And the Australian dollar becomes real popular too when they boys are feeling confident that Bernanke will ensure they don't take any losses..
    1 Nov 2012, 11:19 AM Reply Like
  • Glad you're ok , Maya. I guess it puts things in perspective.
    31 Oct 2012, 07:40 PM Reply Like
  • Author’s reply » Good morning friends and bankers. Today the numbers of new highs and new lows have returned right back into the zone where the HO is taking special interest. All last week the numbers were very weak although with the burst higher on Thursday they did lean toward considerably more gainers than losers. But it appears that was a short term deal and the truth about the internal polarity of the markets is being revealed once again.


    At the moment, with over 4 hours left in this trading day the numbers of new highs and new lows are relatively even having registered the following:


    New highs = 45
    New lows = 33


    These are the type of numbers we witnessed back May of 2010 just before the flash crash and then again in August of that same year. In no way do I want to 'sensationalize' these numbers nor suggest anything bad is about to happen because there is every chance that the monsters who run Wall Street will goose the markets any time they like and set off yet another delusional rally. But I 'do' want to point out that these numbers are very much like those seen at this time of day on previous occurrences of an HO signal.


    So stick around and we'll see what happens over the course of this week. Hope you are all well.
    5 Nov 2012, 11:48 AM Reply Like
  • Author’s reply » Gotta run now folks but the numbers are going to come in at something like 72 new highs and 40 new lows. Nothing overly alarming other than the fact that they are not good numbers for a bullish outlook.


    See ya tomorrow or later in the week :-)
    5 Nov 2012, 03:40 PM Reply Like
  • Author’s reply » Oh boy... here we go again!


    After just 40 minutes of trading the numbers of new highs and new lows look like this:


    Highs = 33
    Lows = 38


    So we're in one of the more rare situations where the number of new lows exceeds the highs. Lately we haven't seen anywhere near this many lows so early in the day and of course the number will just continue to rise as the day progresses. Whether or not it hits the required 85 or so remains to be seen, but I'd have to think that the odds of that happening are higher today than at any time perhaps since the last signal in Aug. of 2010.


    So right now I'd say the odds are pretty high that today we could get the first HO signal in 27 months. Stick around :-)
    7 Nov 2012, 10:12 AM Reply Like
  • Ah, just wait 'till the computers deploying QEi funds kick in - they won't let anything bad happen. Might put egg on the face of the PPT and we can't have that! Plus any bad market action might a dent in the redistributionist social policies the U.S. seems to be enamored of now.


    7 Nov 2012, 10:31 AM Reply Like
  • Author’s reply » Haha... I'm getting prouder of you with each passing month brother Love. I'm pretty sure I remember what you were like when we first met and began discussing a few details on TA way back when... probably 4 years ago. You seemed to me to be, what's the best word... "innocent" and not at all cynical about the fact that there are indeed powers who manipulate the markets. Of course I say that with a ton of respect and... and maybe even a bit of 'affection' thrown in for good measure. Maybe I'm wrong... maybe you were just as informed back then as you are now but as I recall, I don't think so. From the bottom of my heart I mean this with all sincerity... I'm GLAD you're so aware.


    Of course it would be in exceedingly bad taste for me to ask anybody who they voted for but I'm sure curious about whether or not you and the rest of your friends here on SA all voted the same way. You probably don't even know that since one's choice in an election is his business and nobody else's. Nonetheless I'm curious. Like, I wonder if you ever get discouraged or disgusted by the fact that with a 2 party system so many clowns run for office when there are so many great American leaders who are truly far more talented, ethical, honest and dedicated to the Constitution and the USA itself... who are never allowed to run. Or else they're railroaded so fast by the media that they have no chance at all... RP for example. It's infuriating to have no 'good' choices isn't it?
    7 Nov 2012, 10:47 AM Reply Like
  • AR: they word that best describes what I was is "ignorant". Other's also apply.


    Now the phrase is "less ignorant". It better be - I've devoted an inordinate amount of time to reading and studying almost every day.


    As to voting, I never ask and never tell, of course.


    I will say that I wasn't optimistic before the election and am less so now.


    But without a fiscal conservative available on the tickets (no, Romney doesn't strike my that way), I don't know if my attitude would be better if the election had a different result.


    Without that, and no backbone in congress ...


    Where's Jimmy Stewart ("Mr. Smith Goes to Washington") when we need him?


    7 Nov 2012, 10:54 AM Reply Like
  • Author’s reply » "... no backbone in congress..."


    Geez... what a great phrase. And what a great reply. Thanks :-)


    Well it sure looks to me like the HO is going to go off today. At least it's sure heading in that direction (83 of each required).


    highs = 42
    lows = 60
    7 Nov 2012, 11:12 AM Reply Like
  • Rocks: I voted for Romney. Not because I liked was just picking between the lesser of two evils.


    No doubt in my mind (and I haven't yet listened to any MSM chatterbox stations yet) that the market's reaction today is a "justifiable" knee jerk.


    Just tuned into CNBC...and I'm (not) amazed at the timing of today's Greek action.
    7 Nov 2012, 12:30 PM Reply Like
  • Author’s reply » I've had my head buried so deeply in charts today that I'm not even sure about which Greek action you refer to. But I'm not one bit surprised at Draggy's comments today, in light of the fact that about 2 months ago Obama shamelessly begged the European leaders to ensure that "Greece doesn't leave the Eurozone until after my election." Pitiful.
    7 Nov 2012, 12:45 PM Reply Like
  • It feels like the last few months there have been a lot of props used to hold up various indices and weekly/monthly stats. With the removal of those props, things should seek equilibrium.
    7 Nov 2012, 12:33 PM Reply Like
  • Author’s reply » Yeah, I think that now that the election is over some of the curtains can be drawn back and the ugly truth revealed. Talk about smoke an mirrors. Geezus.
    7 Nov 2012, 12:46 PM Reply Like
  • Greetings all. At least things seem to have stabilized for the moment. The S&P hasn't made a death cross yet but at 1397 and the SMA at 1380 it still could. Thanks for keeping us informed AR.
    7 Nov 2012, 01:03 PM Reply Like
  • Yeah, but Boeing announces additional restructuring already with up to 10%+ of management and who knows how many others.


    Welcome back BHO.


    Hello an unemployment rate rise that can't be hidden by jiggling the numbers.


    7 Nov 2012, 01:18 PM Reply Like
  • HTL,
    No need to jiggle numbers anymore, the real ones can come out now.
    7 Nov 2012, 02:20 PM Reply Like
  • Author’s reply » The HO requires a minimum of 86 new highs and new lows today in order to trigger. At the moment the market has generated


    new highs - 70
    new lows - 78


    So with 20 minutes to go I'd doubt we get a signal today. But without a doubt this is the closest shave we've seen since the signal of Aug., 2010. This happened several times just before the HO went off for real back then.
    7 Nov 2012, 03:40 PM Reply Like
  • Author’s reply » Holy smokes... after hours the WSJ is reporting 76 highs and 80 lows. That's not far off at all.
    7 Nov 2012, 04:35 PM Reply Like
  • Wild to see that many new highs on a 2%+ down day.


    No question - these numbers reflect bi-polar"ness".


    thanks for the updates AR
    7 Nov 2012, 09:22 PM Reply Like
  • Didn't think there were that many gun and marijuana companies... but I stand corrected. Nice day for (SWHC), (RGR), (HEMP), and (MJNA)
    8 Nov 2012, 04:48 AM Reply Like
  • Author’s reply » Well it's another day just like the other day :-)


    The numbers for the new highs and new lows this morning aren't quite as high as they were at this time yesterday, but they're tied at 28 each. So we'll just have to see how the day plays out. But at least we know the market is right in the ballpark where the HO is buzzing a bit. I'll check back in a few hours down the road as things develop. It's not that the wheels are going to fall off the planet when the HO issues a signal, but we've been following this darned thing for so long that if nothing else it's an 'event' that 'we' are going to know about before just about anybody else in the universe will, lol.


    EDIT: Geez, by time I got that comment finished the numbers have changed to 28 new highs and 34 new lows. So for now at least, things appear to be tilted a bit to the south.
    8 Nov 2012, 10:30 AM Reply Like
  • Author’s reply » Well with the day more than half done, the numbers we're looking for are more than half way there as well.


    46 new highs
    61 new lows.


    But don't worry about the 'new highs' side of things DigDeep, there are 407 stocks that are still within 1% of hitting a new high of their own. Attaining the required minimum number of new highs (85 or so) is never a problem near a top.


    Believe it or not, I find myself needing a nap right about now. But I'll report in again a bit closer to the end of trading.
    8 Nov 2012, 01:16 PM Reply Like
  • Author’s reply » The NYSE ended up producing 61 new highs and 83 new lows with 86 of each being the required minimum. I guess all I can say is that those of you have been following this blog for over 3 years now have seen this type of activity before. I don't know of any other site where people are following the inner workings of the HO as closely as we are... but they're missing out on all the fun not to mention having the benefit of early warnings. It's their loss, lol.


    See y'all tomorrow I suspect, although I 'do' think the markets are in the mood to bounce to close the week. Probably not much of a bounce I'd guess but something to ease the pain on a Friday afternoon... you know... make the weekend a bit more enjoyable.
    8 Nov 2012, 04:11 PM Reply Like
  • Author’s reply » So tell me Dan, are you looking forward to that '8 more inches of snow' by tomorrow night?
    8 Nov 2012, 05:17 PM Reply Like
  • Author’s reply » Nope! Get lost.
    8 Nov 2012, 05:18 PM Reply Like
  • thanks AR
    bi-polar'ness' abounds
    Naps needed all around!!
    8 Nov 2012, 07:26 PM Reply Like
  • Author’s reply » It's snowing cats and dogs tonight, lol. Seriously, I think 8 inches fell already today. As much as I hate the winter and snowy driving conditions, I have to admit that to be in Banff or Canmore on a beautiful calm night like this when the snowflakes are falling as big as doilies and covering everything in sight including all the tall coniferous trees, it makes for some of the prettiest vistas I've ever seen in my life. When the snow is falling heavily on a calm night in a mountain town, that's when the magic happens. A great time at the pubs. But other than that, winter is a pain in the ass.
    9 Nov 2012, 01:34 AM Reply Like
  • Ah, a sure sign of something mental amiss when you start talking to yourself. But it's really serious when you lose the argument!


    I trust that's not happened (yet)?


    8 Nov 2012, 06:09 PM Reply Like
  • Author’s reply » Haha... no, fortunately I've never lost one of those arguments yet.
    9 Nov 2012, 01:30 AM Reply Like
  • Author’s reply » Yes you have!
    9 Nov 2012, 01:30 AM Reply Like
  • When it turns into a fist fight call the men in white suits.
    8 Nov 2012, 10:17 PM Reply Like
  • or write a book... Fight Club did well... same basis...
    8 Nov 2012, 10:28 PM Reply Like
  • Nobody did third person better than Ricky Henderson.


    Here's some of his best quotes:



    Amongst others, please read #8, #13, and my fav #19...screaming hilarious.
    9 Nov 2012, 12:04 AM Reply Like
  • Posted on REE concentrator... but my only response to third person hilarity is Terry Tate - still funny after all these years
    9 Nov 2012, 01:39 AM Reply Like
  • Author’s reply » Have any of you been checking the chart at the top of the page? The 50 day MA is on the verge of turning lower. A bounce in the NYSE would clear up that problem but man... that MA is threatening to invalidate any signal that the HO might make. We'll have to keep our eye on that. Here's a link to the chart above:


    That's one of the key tenets of the HO. It must issue a signal "while the market appears to be rising". And how is that determination made? By using the 50 day MA as the determining factor... it must be rising in order for the market to be deemed as rising.
    9 Nov 2012, 09:25 AM Reply Like
  • Maybe we will get an AO. Armageddon Omen. (Just made that up) LOL
    9 Nov 2012, 09:51 AM Reply Like
  • Add this.

    9 Nov 2012, 09:53 AM Reply Like
  • Author’s reply » Because of the way the 'minimum required number' of new highs and new lows is calculated it changes from day to day although the range is very narrow. Somewhere between 80 and 86. Because there are quite a number of shares that haven't even traded today (maybe 100 or so), the required minimum for both the highs and lows is currently only 81, a bit lower than usual. I imagine that will increase slightly as the day wears on.


    But the net result (at least for the moment) is that only 81 are required. We 'already have' 84 new 52 week lows. We also have 41 new highs. And with the market looking like it's going to bounce and try to finish the week on a 'winning' tone, and with 155 stocks within 1% of attaining a new 52 week high (over and above the 41 that have already attained it), I'd have to say that the odds of getting the first HO signal today are probably 98% [provided the market does indeed bounce today).
    9 Nov 2012, 10:51 AM Reply Like
  • Author’s reply » Who says Canadians don't have a sense of humor? Nobody, lol.


    I've 'been' to Fort Steele, B.C. and this sign is real, not to mention real funny:
    9 Nov 2012, 11:49 AM Reply Like
  • steer clear of pepper smelling dung... got it


    thanks for the laugh
    9 Nov 2012, 11:56 AM Reply Like
  • AR: LoL! I love it!


    9 Nov 2012, 11:56 AM Reply Like
  • I have seen that sign before posted on the web. It is funny.
    12 Nov 2012, 09:08 AM Reply Like
  • Author’s reply » Well friends... all we're doing now is chasing the required # of new 52 week highs. We're over half way there with 45 registered, 140 more that are within a whisker and with more than 60% of the trading day still ahead of us. Surely it's gonna happen today. The only other factor that I'd need to see verified is whether or not NYMO ends up negative on the day.


    EDIT: It's a bit amazing, but since I published this comment and while the market stretches ever higher, it's the number of new lows that is growing, not the new highs. But of course if the market continues higher the number of highs will increase as well. It's just a matter of waiting to see 'how many'.
    9 Nov 2012, 12:03 PM Reply Like
  • Author’s reply » Well I have to admit that I'm surprised the HO didn't go off today because all the elements were lined up perfectly. But strangely, as the market bounced off the opening low as I suspected, it was only the new lows that continued to increase as the day progressed. At the end of trading the market has generated only 59 new highs even though there were so darned many that are so close. But 114 new lows were registered. Those numbers will likely be adjusted a wee bit after the close but it won't matter.


    So... we start all over again on Monday. I've got a hunch Monday will be a green day but I also suspect that if the market does bounce on Monday it would likely be muted. Just for the record though, my accuracy in making predictions like that is running at a rate of somewhere around 7% so you might want to take my opinion with a grain of salt.


    I hope y'all have a great weekend.
    9 Nov 2012, 04:00 PM Reply Like
  • Thank you for your vigilance this week, AR. Really appreciate it and you have a great weekend also.
    9 Nov 2012, 04:05 PM Reply Like
  • AR: No shame in being part of the seven-percenters! ;-))


    At least I hope not - I hope to ascend to that lofty level some day. :-((


    9 Nov 2012, 04:12 PM Reply Like
  • Author’s reply » Good morning ladies and others. I'd like to wish each and every one of you a most Happy Birthday today. Granted, I'm making certain assumptions when I say that. Ok, on to things I 'care' about. LOL


    Well what else can I say... here we go again. As you know, on Friday at about this time I was pretty darned convinced that we were going to see the first HO signal in 27 months. Today, after one hour of trading the market is looking even more likely to issue a signal today than it did on Friday. So after stating on Friday that I felt that the odds were probably 98% we'd see a signal that day, my accuracy at making predictions is still fully in tact at 7%. So with the added confidence that admirable record affords me, I'll have to just go with a repeat of that prediction for today.


    With the majority of the trading day still ahead of us we're looking at a dead heat here:


    New highs - 51
    New lows - 56


    Annoyingly, we're at another of those crazy situations where the 50 day MA of the NYSE is threatening to roll lower very soon. If the HO doesn't issue a signal this week, it won't be able to do so next week. But that may not even become an issue since I imagine we're going to see the first signal today.
    12 Nov 2012, 10:45 AM Reply Like
  • Author’s reply » Well by golly things sure dried up with no volume, no direction and apparently no sense of fear whatsoever as the VIX collapses. So with an hour to go and 84 of each required, the new highs currently sit at 65 with 80 new lows.


    And unfortunately I've gotta run now. For those who might care to watch the numbers as they develop you can catch them on the WSJ site in the link below. You can find them in the 3st or 4rd panel from the top on the left side of the page:


    Sorry I gotta run folks but my eyes are just about crossed right about now and I've got a busy night ahead of me. Have a great night and we'll probably touch base tomorrow :-)
    12 Nov 2012, 03:04 PM Reply Like
  • AR, More hillarious travel signs. I think yours was much better.

    12 Nov 2012, 04:10 PM Reply Like
  • Author’s reply » Well it turns out that today was the closest shave yet with the new highs missing the required minimum, coming in at 74 with 84 required. The lows came in at 88 so had there been10 highs we'd have had a signal today.
    12 Nov 2012, 05:03 PM Reply Like
  • good work Albertarocks. just a quick reminder what it means when the signal goes off and a plan of action? thanks AR!
    12 Nov 2012, 09:42 PM Reply Like
  • Author’s reply » I wrote an article back in January that people could read ahead of time so they would have a good idea what to expect. You can find that article here. I hope it helps:


    In a nutshell though, once the HO issues a signal nothing spectacular 'has to' happen although the odds are high that more downside is coming at some point over the next month. But neither does anything have to happen 'immediately'. It's just a warning that the markets are polarized to an extent not often seen and that normally that internal weakness will be proven to be a harbinger of more weakness to come.


    As far as a plan of action... I'd just advise that going long is a very dicey proposition under these conditions. I'd be looking for short entries and then once the market has dropped to the point where you think a bounce might occur... take profits. That bottom shouldn't be considered to be a "buy" signal though. I don't know where the market is headed Hammer (other than down most likely) but I mean I don't know how far it might fall. But I'd definitely consider that after 32 months of relentless upside action, the overall trend may indeed have turned to "down" now. So we'd play it accordingly, respecting the dominant trend and not trying to bet against it by going long. The 50 day MA is a good one to use I'd say, for trying to answer that question which is often harder to answer than one would like... "which way 'is' the dominant trend?".


    Having said that, there are some Elliotticians out there who are making a case for higher prices yet. Some of the charts they produce look reasonable in that they make it appear that surpassing 1500 on the S&P wouldn't be impossible. I just don't know for sure so I just play the markets on a day to day basis... very nimble with a bearish bias. These are just my humble opinions Hammer, not trading advice.
    13 Nov 2012, 12:51 AM Reply Like
  • Good work Albertarocks, I enjoyed following your posts. So if the HO signal is not only reached, but continues to go beyond the minimum required of 86/86, unabated, what does it mean? Thanks!
    12 Nov 2012, 10:15 PM Reply Like
  • Author’s reply » Thanks Neurotic Knight. LOL


    Once an initial HO signal is triggered, the rules state that in order for it to become "an official HO event" it must issue another one within the next 30 days. Usually that signal comes much quicker than that. But I would like to make the point that for me personally, once the HO has signled, I'd be in no mood to wait for the second one. As far as I personally am concerned, the message is very clear already.


    No, the actual numbers don't really make much difference once the HO has signaled because the message has already been delivered. There are often a cluster of signals but any signals beyond the second one are all just a moot point. They would have no implications at all. Dr. Robert McHugh, even though he 'still' doesn't have the rules correct and has erroneously been reporting HO events all autumn long, still has the best records of past HO events and some interesting stats about what happened next. The HO even went off before the crash of 1987. You can see all that interesting data in the link below. It's an old document, but the past records are still valid of course. It's interesting reading:
    13 Nov 2012, 12:56 AM Reply Like
  • Author’s reply » A half hour into the trading day and the minimum required number of new 52 week lows has been recorded. So we just wait now and see if the min. number of new 52 week highs can be reached. With 303 stocks within 2% of attaining that level it would seem that it's not out of the question.


    No predictions from 'me' though regarding whether or not the HO issues a signal today. Nope!


    But I'm thinking that considering the glorious bounce off a nasty red open (courtesy of JPM and their ass-clown partners over at Citibank no doubt), and with the Max Pain numbers way above where we are currently, the odds of a pretty decent bounce over the next 4 days are probably quite high. Because there are millions of dollars worth of 'insurance premium' at stake here and by golly, Goldie, Citi and JPM know where it is and how to steal it. They should, they're the ones who sold it.


    Sorry, that was probably just the cynical side of my brain yapping off.


    Stay tuned :-)
    13 Nov 2012, 10:15 AM Reply Like
  • Author’s reply » I meant to say "they should know where it is and how to steal it, they're the ones who sold it". I didn't mean that "they should steal it". LOL
    13 Nov 2012, 11:09 AM Reply Like
  • The Omen cometh. I feel it in my water. Interesting times indeed. Thanks for all your efforts.
    13 Nov 2012, 11:13 AM Reply Like
  • Author’s reply » You're welcome KD. You know what's most ironic? If the HO issues a signal today, it will have happened on a green day that came about as a result of a very impressive bounce off a nasty red open. Everyone will be feeling bullish as hell because it 'will' produce a rather bullish looking candle today. As well, the market probably would continue to bounce into OPEX on Friday. So the HO will once again be poo-poo'd as being a farce. And of course nothing could be further from the truth. But the trolls will have fun with the fact that "the HO went off and what does the market do, it soars". And of course the only reason the trolls will laugh it off is because trolls are stupid. :-)
    13 Nov 2012, 11:23 AM Reply Like
  • Let me propose something that many will consider radical. A Fiscal Cliff compromise of more taxes and less spending could very well bring on a recession. Everyone seems to think that the deficit and the debt are the problem. The response to this should be, "It depends".


    The reason it depends is because of the monetary system in the US, and the reason the deficit and the debt are being incurred. If it is being incurred for policies that will make people less productive, then it is a problem. If it is being incurred for policies that make people more productive, then it is a good thing.


    The problem with the Fiscal Cliff is that the focus is not on what makes or doesn't make the deficit and debt a good or bad thing, but the focus is that because it exists, its a bad thing. As such, everybody seems to think that the rational and reasonable response is that in order to close a gap you cut spending and raise revenue. Think about that. If such an analysis were really a rational and reasonable response, no company any where would ever fail. The problem with this approach is that it is specious reasoning. It is ignoring what the real issues are.


    The real issues are productivity and how our monetary system affects asset prices in the US. The reason BB is being accommodative is so that Fed Res notes can be created. These notes are used to bid up asset prices and lower financing costs. Of course this comes at a price for people that are providing the financing, but never-the-less, they are forced to pay and the result is financial assets are bid up in price. These higher prices make people feel wealthier (BB calls it the wealth effect), and they spend.


    In the US we measure our wealth on basically aggregate spending, which we call GDP. In our monetary system tax increases "cancel" Fed Res notes. The Fed Notes are returned to the US Treas. A decrease in gov spending, fails to create Fed Notes. So a tax increase and a spending decrease will result in a whole lot less Fed Res notes. Lower asset prices will result because there will be fewer notes to be used to directly bid up those asset prices and there will be fewer notes spent on the things made by the companies that represent those equities.


    Now granted, most of gov spending makes the US unproductive, but the spending is measured by GDP. A Fiscal Cliff deal that basically cancels a bunch of Fed notes that are being used to bid up asset prices is going to result in lower asset prices, a lower wealth effect, and lower spending by everyone. GDP will go down, maybe negative, and maybe negative for two or more quarters depending on the size of the "compromise".


    I don't think the US populace in general has any idea of what is going on. All they know is, they don't want to have to suffer pain of any kind, so while a reduction in gov spending would be good for the economy, it would take 24 mos or more for that to manifest. So with such a loud uproar in a recession, it would make sense for the Fed to respond in a big way. That would then have a chance at reinflating asset prices, because the Fed may offset the destruction of Fed notes by tax increases and spending cuts by creating its own new notes.


    What has been happening in the markets the last few days adds support to this analysis. People are anticipating having fewer Fed notes via cap gain taxes close to 45%, and are front running this expected note canceling. Laffer said he saw this in reverse in the early 80s, and wished they had made tax decreases retroactive instead of delayed. He said they noticed people delaying economic activity in anticipation of the new tax cuts.


    Based on what is shaping up, a drop in equities markets seems almost certain. The question will then be, "what policy response (most likely from the Fed) will be taken to reinflate these asset prices?" The HO activity may infact be illustrating numerically what these upcoming broad policy changes would logically implicate.
    13 Nov 2012, 12:04 PM Reply Like
  • Author’s reply » JHoop, that is a phenomenal comment. Would you consider copying and pasting it onto my own blog? You don't have to register with Disqus (the comment handling system) on my blog I don't think, but if you don't register, then your avatar and "persona" won't be properly recognized. Alternatively, with your permission I could copy and paste it and of course give you full credit. Let me know?


    On second thought, it's time I put up another fresh post on my own blog anyway, so maybe I'll do something I've never done before... submit a new post based on someone else's fabulous comment.
    13 Nov 2012, 12:20 PM Reply Like
  • JHooper agree with AR -- I think you covered several key points which are likely to exert downward market pressure. Of course I do expect some small pops in between to keep some buyers in the game.
    Thanks for your comment.
    13 Nov 2012, 12:40 PM Reply Like
  • Well put hoop
    great question;
    "what policy response (most likely from the Fed) will be taken to reinflate these asset prices?"


    BB has indicated monetary policy has its limitations and fiscal policy "measures" are needed. So he's had to have thought the fiscal austerity or fiscal stimulus through... in terms of the Feds response(s).


    His 'measure' probably meant fiscal stimulus - the reverse of the cliff inertia we're seeing.


    What will they do? What can they do effectively?
    outright buying of;
    securities and commodities? underwater mortgages directly? Empty/foreclosed properties...?


    Positioning for their move to inflate - that's the objective. Thanks for bringing focus to that hoop.
    13 Nov 2012, 01:18 PM Reply Like
  • "the reverse of the cliff inertia we're seeing."


    That is what is perplexing. If fiscal policy via a compromise has basically said, "we will are committed to destroying Fed notes", then all that's left is BB. If he wanted to impact equities directly, he could just start buying them from anybody. That would start bidding up equities, and people would have money to spend. They spend it, and then it looks like earnings justifies the new higher price. This attracts new buyers, and a cycle is created. The cycle is temporary though, so you have to be ready to get out.


    The other way this happens, is when fiscal policy puts Fed notes in people's hands, like the "stimulus" package that began in 2009 and ended between 2011 and 2012 (see the chart below). It creates the same cycle. Its like blowing on fire, but not adding anymore wood. It burns bright, consumes fuel, and then grows colder than it was before. However, since fiscal policy has just cut a deal to increase taxes and cut spending, I can't see any chance of them turning around to vote in more spending in the form of a fiscal "stimulus".


    As such, I see all this falling on the Fed. I know they have rules that govern their behaviour, but what we have been seeing the last few years is a tendency to sweep rules aside when things get different.


    All I know is, that there will be pressure for somebody to do something, and the only logical player at that point would seem to be the Fed. They may find some creative mechanism, like Draghi, to get Fed notes into the hands of those that will buy equities.


    No matter how its done, what seems likely is that equities will tank, and then be reinflated. If this can be timed right, lots of wealth can be transferred your way.


    You could literally see a rising equities market in the middle of a recession if BB inadverently times it that way.
    13 Nov 2012, 02:00 PM Reply Like
  • Author’s reply » "You could literally see a rising equities market in the middle of a recession if BB inadverently times it that way. "


    Absolutely! And along with it rising prices for 'some' commodities, especially in the foods sector. Precious metals would almost assuredly soar in response to rising inflation although fuel prices could conceivably remain relatively steady even though there would be decreasing demand. Oil price steady, gasoline at the pump climbing, and real estate crashing once again in spite of rates near zero. God forbid what would happen to real estate if the FED responds to rising inflation by hiking rates. Or more accurately, when the rates on the 10 year bonds begin to rise in response to inflation.
    13 Nov 2012, 02:57 PM Reply Like
  • JH, do not forget the sequestration is a reduction in spending increases not in actual spending and it is over 10 years. You might look at that issue too. So instead of increasing spending 5% every year they are now at 2% per year on defence spending. I might not have the numbers exactly right but that is the idea.


    I do not know what the entitlement spending cuts will be.....or how they will be figured. I have not heard anything. I think its because no one has made a determination since they have no intention and never had any intention of cutting the spending.
    13 Nov 2012, 03:08 PM Reply Like
  • "reduction in spending increases not in actual spending and it is over 10 years."


    Yes. This is spot on. It will definitely come down to how much they do and when. So on one extreme you would have it all happening day 1 after an agreement. That shock would set in right away, and what you would have is an economy sent into a recession, but with no recovery in sight. The other extreme will be can kicking or leaving it alone altogether. I think they will do something though. After all it is highly fashionable to "do something".


    I could see the tax increases happening more so right away, they love doing that, with any spending decreases phased in. This sets up more of a malaise, with a drop in equities, just not an extreme one, that tends to set a new, new normal. So the S&P goes back to 1100 and 1200 to 1300 becomes the new top of the range.


    In that scenario you would almost want to switch to some 7 to 10 year bullets or a higher yield callable with a year or longer call protection right now.


    Again, it all comes down to what they finally do. I just wanted to point out a fundamental principal that drives how I understand the markets. It boils down to real productivity that gets manipulated by gov coercion transferring wealth within the system. As long as the real productivity isn't damaged to severely, the system will keep generating wealth to be transferred. I've resigned myself to the position that I need to find ways to have some of that wealth transferred my way.


    What set me off to this way of thinking was LM Shaw. Look at this link.



    If you look at what he was doing, it was basically ZIRP (no cash reserves) and QE (bought back gov bonds). Has anyone ever heard of the Panic of 1907? It appears Shaw was mimicking what a central bank would have done, but he was doing it via the Treasury, and he created a bubble that burst in 1907. They apparently didn't learn their lesson, because their response is that what Shaw did just wasn't big enough (sound familiar), and they drew up the Fed (originally called the Aldrich Act - did you know that Aldrich's daughter married John Rockefeller?) that became reality in 1914.


    What I see is a market that is polluted with wealth transfer in the name of "growing the economy". I will advocate for this to go away, but I don't think anyone is listening to this anymore, so I am going to find ways to protect myself by understanding how their game works.
    13 Nov 2012, 05:00 PM Reply Like
  • Author’s reply » Here's a pretty cool chart from ZH today. It's entirely possible.
    13 Nov 2012, 01:13 PM Reply Like
  • Those charts correspond very well with the beginning and end of CB activity. Not just the Fed, but also the ECB and LTRO. This is why I said what I did before. The creation and destruction of CB notes has a major impact on asset prices. Granted, a growing economy is important here as well. N Korea or Cuba couldn't pull things off this way, but the US and Europe have a large capital base that is capable of producing ongoing large amounts of additional capital. So long as fiscal policy via taxation and taxation via regulation doesn't totally kill that off like it has in N Korea and Cuba, large amounts of wealth can be transferred from the general populace to the financial markets.


    If we can refine ways to better quantitatively measure that, like with the HO, we will be refining ways to have some of that wealth transferred our way.


    Again, its not really good for the economy, and there will be days of reckoning, but if we better understand how our monetary systems transfer wealth via the creation and destruction of central bank notes, perhaps we can be out of the water when the storms hit and back in when then water's fine.
    13 Nov 2012, 01:34 PM Reply Like
  • Do not underestimate the Bernank. he has no limitations. When do the BRIC countries come out with a total rejection of US monetary and fiscal policy?
    Germany is losing confidence as they consider repatriating their gold hoard out of UK and US.
    13 Nov 2012, 01:42 PM Reply Like
  • Author’s reply » I couldn't agree with you more about the Bernank having no limitations, especially regarding his loyalty to his owners and the degree of evil he will employ to ensure that it's "they" who survive, regardless of whether or not their policies result in $16 for a gallon of gasoline or $35 for a loaf of bread. Crappy bread that seems to be the standard these days, with no moisture, no flavor and no grains... just refined crap.
    13 Nov 2012, 01:53 PM Reply Like
  • Get a bread machine, make it yourself. Not the spending bread AR.
    13 Nov 2012, 03:13 PM Reply Like
  • Author’s reply » You mean a bread making machine? Those things need electricity to run don't they? I think you're right... I'm gonna get me one of them contraptions as soon as we get electricity in Alberta.
    13 Nov 2012, 03:27 PM Reply Like
  • Hammer... he may have no limitations... but he's got a funded documentary on the Fed coming to him now...
    13 Nov 2012, 05:23 PM Reply Like
  • I just decided to cut bread out of my diet...just in case!
    16 Nov 2012, 08:23 PM Reply Like
  • Author’s reply » Back onto the HO for a second here... it wasn't even close today. Yesterday might have been our 'warning shot'. The market just doesn't seem able to produce any new 52 week highs these days even though there are plenty of stocks that are withing striking distance. But 'those' are becoming more scarce with each passing day too. And for tomorrow, if the NYSE opens unchanged the HO is going to switch off because the 50 day MA will have turned fractionally 'south'.


    Here's a link to the chart at the top of the page.


    I've got the orange line set up for tomowwow alweady. As you can see, and I touched on this topic last week, unless the NYSE turns sharply higher next week the HO is going to go out of commission again. The problem has been that the required numbers of new highs and new lows have not been attained "while the 50 day MA is rising". This has been an issue each and every time we get close to seeing an HO signal. That doesn't mean there's anything wrong with it, I think it might mean that the big fearful decline might still lie a head of us. So maybe a bounce is overdue and we might not see an HO event until maybe January?


    That wouldn't be out of the question either. A Santa rally? Then a collapse on Jan. 2, just like in so many other years? Sure, I guess that scenario is entirely possible. In any case, hang in there and we'll just continue to monitor this little piggy and see if it starts to squeal later in the month. But by golly, the NYSE has some serious bursting higher to do if the HO is going to get turned back on next week. Look at the candles coming up... on the left side just inside the grey box.
    13 Nov 2012, 04:10 PM Reply Like
  • Author’s reply » I've posted a fresh version of the HO instas. You're probably tinking "it's about time" and you'd be quite right. So without further ado, here's the link:
    14 Nov 2012, 11:31 AM Reply Like
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