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John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
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  • The New Hindenberg Omen Blog  87 comments
    Mar 23, 2010 12:25 AM

    A reader, Albertarocks, has been tracking the Hindenberg Omen using a series of Instablogs.  The previous Insta comment stream has gotten un into the 80s, so I am starting another Instablog to simplify the search for the latest posts.

    The post Albertarocks made today offers some insight into minor movements in the Hindenberg Omen parameters and can be accessed here.

    The original Hindenberg Omen post with links to references on the subject is here.  The first paragraph of the original post is repeated below for convenience:

    I have found this an intriguing metric over the years.  Michael Eckert has an article this weekend summarizing The Hindenburg Omen here, at EWTrends and Charts.com.  In June 2004, Robert McHugh wrote a more extensive article at The Market Oracle (here).

    I am hoping that Albertarocks will post future commentary about the Hindenberg Omen in this comment stream.

     

    Disclosure: No stocks mentioned.

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  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Just a little update on the Hindenberg Omen.

     

    The 10 week average on the NYSE has turned more solidly to the upside and barring any sort of nasty correction, it appears that aspect of the HO is going to remain "on the job" for weeks to come. That's good news insofar as the possibility of the HO failing for the first time in at least 3 decades has become more unlikely.

     

    The number of new 52 week highs has be slowly eroding as the market reaches ever higher without even a 5 minute rest. On the one hand, that's definitely a "rumbling" within the components of the HO. On the other hand, although that number (only 190) is now within reach of fulfilling its requirement, the low number (when taken separately) could also be interpreted as "no longer at a high extreme". So on its own, the number of new 52 weeks highs is not necessarily a bad thing in my view. In fact, it's relaxing.

     

    The number of new 52 week lows has been relatively steady, with a slight bias towards rising. As of this writing, the number is a very tame 7 although it had reached as high as 23 in February. We'd be looking for that number to be at 75 minimum in order to fulfill its duty in triggering a HO signal. I'd perk right up if I saw that number hit 40 but we haven't even seen that level in over a year now.

     

    Although I personally don't believe this incredible and impressive rally has been based on anything other than liquidity (free money for the bankers to use), I'm no longer convinced that a market crash is in the cards (in the fashion I had previously envisioned it). In my view the market has to correct at some point. In fact, it would be so much healthier for everybody if it were allowed to happen.

     

    But as this remarkable pattern evolves to the upside, it's clear now that it has taken on a 5 wave form since the March 2009 low. This is not what Bob Prechter and Dr. Robert McHugh (and other EW theorists) have been calling for over the past year. Therefore, in my opinion they had better get back to their drawing boards because this market is not evolving in any way that even closely resembles a 3 wave move up from the March lows as they have been forecasting. As a result, I doubt we're going to be seeing a return to the March lows as they've been forecasting (if there is any validity to Elliott Wave theory at all). True enough though, up until the highs of January, there was indeed a very visible 3 wave form. It's now a 5 wave form. That is an entirely different kettle of fish with totally different implications.

     

    But it makes great sense that there should be a 3 wave correction at some point in the not too distant future that would correct these incredibly overbought markets, relax them somewhat, and make a great case for perhaps another march toward all time highs. If the dollar is going to continue to fall in value and if the deflation case is dead, then new all time highs shouldn't be out of the question. On the other hand, any foreign default will be screaming loud and clear that the deflation case is far from dead. So at this point, who knows? Even Mish and Peter Schiff are in complete disagreement on that topic and I completely respect and admire of both of them.

     

    But although that makes sense that the market simply can not go up in a straight line, it's just speculation (expectation of normalcy) at this juncture about how a correction would unfold. We can't expect this market to just continue to march upward in a completely unabated fashion forever. But until something changes where the FED decides the market has gone far enough (and it is the FED because mutual funds were 97% invested 3 months ago), perhaps this sort of scenario is exactly the type of situation where an indicator such as the HO is worth its weight in gold. I personally had never paid attention to the HO in the past (to be honest I'd forgotten about it because it triggers so seldom) so I don't really know what to expect. I have no idea what shape of market correction will transpire and neither does the HO. But to be very honest, I've never appreciated it as much as I do right now. If and when it does trigger, I'm willing to accept that at that time, it might only be signaling a stiff correction is about to ensue, and not any devastating crash. That's why I've always had distaine for the title Hindenberg OMEN. It's too sensationalistic. And besides, its easier on my fingers just to type the initials.

     

    So I don't expect anything out of the ordinary (like that worrisome condition with the MA going "off line") is going to happen with the HO from now on. Consider it "on the job", and I'll make some more notes here when it starts to give some signals that are more meaningful. But until then, I wish everybody well and still urge the use of tight stops... just because it's prudent.
    .
    30 Mar 2010, 08:54 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    An interesting development going on here. As you might have guessed, the number of new 52 weeks highs is very elevated. So the HO is about as far from triggering any type of warning as it could possibly get. But it bears noting that the number of new 52 week highs today sits at an amazing 587. In fact, this week that number has risen higher than it even was at it's peak in Dec. of '06. In other words, it's at a level that's not sustainable (nor healthy for that matter).

     

    The last time this number was this high, it was of course unsustainable, so it turned lower a few times and posted lower highs over the following full year before the market began to crack and eventually crumble. And during that entire year, the HO did not signal until the market actually began to crash in earnest. So it's just an interesting observation that the number of new highs is nutso high right now and it wouldn't be out of line to expect it to correct somewhat. Any minor correction would probably fit that bill nicely since that number can move quite quickly (it's quite responsive).

     

    Best regards to all.
    14 Apr 2010, 05:43 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    For some reason SA didn't allow me to edit the above comment at all. So I need to amend it with another post...

     

    In no way do I mean to imply that we have "another year of clear sailing". In fact a pretty stiff correction wouldn't be out of line at all. Back in 2007, after the number of new 52 week highs had peaked (at a level not even as high as its level today), the market corrected about 10%, rose again to yet another new high, then corrected 20% and rose again to the ultimate higher high. So as always, I urge tight stops.
    14 Apr 2010, 06:02 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    ... well that didn't take long did it? As I mentioned in the two posts above, that extreme level of new 52 weeks highs wasn't sustainable. After today's sell off, that number has already dropped from the nose-bleed 587 to a more realistic 197. Today's action provided a good example of the "responsiveness" I had mentioned. After enough of the right sort of action, the new 52 week lows will become just as responsive, but it takes some serious sideways action or serious down action to get them going. Let's hope it's only sideways action so that we have more time to react without incurring much damage.

     

    But overall, as far as the HO is concerned, it's going to take more sustained activity than just a day or two, either sideways or down to get any warnings. The number of new 52 week lows only sits at 7 here at the end of the week and the indicator is looking for something quite a bit more alarming (75... and while new 52 week highs are still happening too). So for any investors who were spooked by today's action, the HO is nowhere near flashing a warning, let alone an official signal. But naturally it made a minor move in that direction. The HO is such a serious indicator that it's entirely possible (in fact I expect this) that it might not even give its first signal until a fairly substantial loss in the markets. I'm almost certain that a 5% correction wouldn't do it. It depends how it happens. Obviously, sideways action would be great for all of us, rather than an outright crash. And even at that, as most of you know, the HO is not infallible and could still give a false alarm signal.

     

    The idea here is simply to sit up and take notice when it starts to rumble... and then make your own educated decisions. It's not much different than a friendly phone call from a neighbor who says: "Hey Frank, I just wanted to let you know your roof is on fire." That does not mean the house is going to burn down, but it's enough of a warning that you'd at least pay attention, right? And today, nobody's roof is on fire.

     

    One thing is certain, you will know early. As far as I know, you people who drop in here from time to time are the only people who are going to get warnings before an official occurrence. The others will hear about it "after the fact". You're going to hear about it "before it happens". At least that's my goal... a promise I made to John L. many months ago.

     

    Have a great weekend all.
    .
    16 Apr 2010, 07:22 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Once again, the HO is showing us another but different form of "extreme". Officially, the HO is not in any danger of giving a signal at this moment in time but it's making some noise just beneath the surface.

     

    On Apr. 14th, I'd mentioned that the number of new 52 week highs had gotten into the stratosphere and that it wasn't sustainable. As anticipated, the market corrected almost immediately and two days later that number had dropped considerably. That extremely elevated level of new 52 week highs was maybe the first sign that the market is getting irrational.

     

    Now what we're seeing is "extreme volatility" in that number. As I'd mentioned, the number of new 52 week highs is quite responsive so to see fluctuating quite a bit is normal. But what we're seeing right now looks more like a seismograph. It is now moving between 80 and 580 on a regular basis. This is not normal activity... these wild swings are a form of extreme. Those stocks that are fluctuating near their 50 week MA are not necessarily the same stocks each day either. I interpret this activity as something akin to a tremor indicating that there are now probably a whole lot of stocks teetering near their own 52 week moving averages. Therefore, it would be logical that one day we could possibly see many or most of them all drop below their average on the same day. The worst case scenario is that they all drop at once and the number of new 52 week highs drops below the limitations set by the designer of the HO. But there's no point in giving that much thought right now... that problem may never happen. Even if it did, I would pretty much ignore it because if your house is fully engulfed in flame it's pretty much a safe assumption that it's on fire and there's not a lot of time for quibbling about the obvious.

     

    In the meantime, the number of new 52 week lows is forming a base. By that I mean that although it's been a very, very low number for the past year, I apply a moving average to it in order to get a better picture of movement. That MA is forming a base and rising. As of today, the number of new 52 week lows is still very mild at only 12. But it would also change rather quickly once that number "gets rolling". It'll take a few more down days (or even sideways days) to ignite the fuse, but there are sparks starting to fall in the neighborhood. Here's a great example of what I mean by "sparks". In the NASDAQ 100, today it too reached into nosebleed levels, up over half a percent. But while it was doing that, the number of stocks in that index above their 52 week average actually fell 5%. That kind of negative divergence is really serious stuff.

     

    I'm only submitting this post because as promised, I'm trying to give advance notice whenever I see something out of the ordinary. And right now although the HO is not officially even threatening to flash a signal, under the surface it's saying "hey... look at me, I'm thinkin' about throwing a party". So it definitely bears watching right now, although admittedly it might only take another run-up in the markets to completely alleviate these rumblings for a while further. But the odds of that happening are likely getting slimmer with each passing day since the other global markets are cracking while the US markets just keep getting pumped as if Greece didn't exist. Greece does exist. So does Dubai. So does Portugal, Italy, Austria, Spain, Italy, California, Latvia, Lithua ....

     

    Even if the HO had never been invented, all the other indicators I monitor are suggesting that the market has moved so darned far without any correction worth noting, that surely it's prudent now just to stand aside. But although my personal opinion is of no value to anyone other than myself, mathematical models like the HO are for everybody. So I'll stay on top of it and let you know when anything else new or unusual happens. That's my purpose here... to try to provide an advance warning without crying "wolf" and without any sensationalism... just with pure facts. I've got a hunch it won't be a week between posts from now on either, so don't go too far away.

     

    GL to all.
    22 Apr 2010, 06:35 PM Reply Like
  • robert.b.ferguson
    , contributor
    Comments (10491) | Send Message
     
    Thanks Rocks.
    22 Apr 2010, 07:03 PM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    Always interesting to read. Thanks for the insights.
    22 Apr 2010, 07:19 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Robert, lower98th, you're most welcome. In review, it appears that I'm of the belief that Italy exists twice. Maybe they're twice as bad off as I thought. lol
    23 Apr 2010, 01:51 AM Reply Like
  • The shark
    , contributor
    Comments (159) | Send Message
     
    Thanks Rock - keep us "real"!!!!
    23 Apr 2010, 08:28 AM Reply Like
  • ahandy
    , contributor
    Comments (22) | Send Message
     
    Somehow I knew we'd be seeing a post from you after the last few days. As always, much appreciated.
    23 Apr 2010, 07:49 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Wow! The extremes are getting to be almost jaw-dropping in scope. Last week I'd mentioned that the number of new 52 week highs in the NYSE had reached an amazing 587, much higher than the rally into the peak in 2007. I'd mentioned that it was likely unsustainable. And as suspected, the market corrected ever so slightly over the next two days and that number fell to a more reasonable level of 197. Not only did it fall to the 197, it continued to fall to as low as 85.

     

    I hope you don't find this chart too busy, but a picture's worth a thousand words:
    stockcharts.com/h-sc/u...

     

    I thought 587 was extreme. Today, only days after hitting 85, that number has surged to 614. These kinds of swings are nothing short of bizarre, but having said that they don't necessarily portend anything sinister. They're just extremes that we haven't seen since 2004, and trying not to sound like a broken record, I only want to remind you that "extremes" don't normally last long. It's entirely possible that another two day correction will once again drop this number back into something more sustainable, while not causing any sort of real damage to the overall trend.

     

    In any event, this is really just an interesting side-shoot of information that came out of our vigilance over the Hindenberg. Take it for what it's worth... we're at extremes on many levels, but extremes can get even extremer and overbought can remain overbought for quite a long time. One day, a limit is always reached but I have no idea where that limit is. There is no prediction in this interesting info that I can see, but I do think it's important to be aware of it... keeps us alert. Have a great weekend and I hope you all make lots of money next week... because I might need to borrow some.
    23 Apr 2010, 08:42 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Sorry, the link in the comment above is now dead. Here's a new link to the same chart:

     

    stockcharts.com/h-sc/u...

     

    You're welcome Mark and smarttogther. I'm glad you're willing to pay attention to things other than the media branch, but you folks have always been good at that... having a realistic take on this bizarre market. It's pretty hard to argue with an incredible trend like this... it is what it is. But I find it impossible to be long. Had I just accepted that logic has been suspended and that the FED would provide enough liquidity to drive these markets well beyond reason, held my nose and just gone long in the face of what I think is common sense, I would have purchased my yacht by now. As it is, I'm gonna have to sell my kayak soon and then I won't even have an avatar, let alone a pot to pee in.
    24 Apr 2010, 07:45 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Thanks for keeping us all informed, Rocks!
    23 Apr 2010, 10:56 PM Reply Like
  • smarttogether
    , contributor
    Comments (82) | Send Message
     
    Thanks for putting in the work AR!
    24 Apr 2010, 03:13 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Just a real quick one... I gotta run. There's yet another disconnect that happened today. Last Friday the number of new 52 week highs finished at the highest level since 2004. Today, that number was surpassed. That's amazing in and of itself, but when you consider that today's higher number happened while the NYSE finished lower, it's outright bizarre. It's just another example of an extreme, but not necessarily implying anything sinister. But at the very least, it's an alert to stay vigilant.
    26 Apr 2010, 04:41 PM Reply Like
  • The shark
    , contributor
    Comments (159) | Send Message
     
    Thanks Rock.

     

    I think you should take a break in Cape Town some time - keep us "real".

     

    I see Portugal is now on the agenda - Ireland still looks dodgy, Dubai has gone "unresolved" under the radar, Germany has elections with Greece an "election" hangover for Merkel, UK looks like a hang Parliament, the USD continues to show signs of contining to strengthen, Italy is in a similar boat but not yet on the radar, The Chinese stock market looks like it is heading the downside in Asian stocks which suggests real liquidity tightening, India has a cricket corruption scandal involving key Government Officials - in summary a derioating "sentiment" on a wide front.

     

    The good news is earnings and revenues - particularly in stronger developed countries - positive signs of recovery - but with suppressed housing and continued unemployment is the reovery sustainable?

     

    All in all a precurious state of "recovery" - which as you have mentioned does not mean a significant correction - but surely it implies the easy money has been made and at best the markets shoulld pullback from these levels and churn a protracted sideways move for at least the next year or two? Alternatively it keeps building by going 1% up .5% down for a while - net result is up but slowly.
    27 Apr 2010, 04:34 AM Reply Like
  • Augustus
    , contributor
    Comments (2745) | Send Message
     
    Thank you for your pursuit of the data and the updates of this indicator. It does give nice warning signal. The number of NH has been pretty amazing, however we are comparing to just after the March 09 lows which took everything down with that falling tide. It may really influence the ability to generate a NL signal.
    26 Apr 2010, 08:31 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Thanks Shark. Yeah, if I'm going to meet Maya in the Honduras in late 2012, then I might as well just keep on truckin' and meet you in Cape Town. But the market had better start behaving logically soon or I won't even be able to afford to visit my son across town. Speaking of the market behaving logically........

     

    All I can say at the moment is "wow" when referring to the number of new 52 week highs. I'd mentioned yesterday that that number had hit a level (647) not seen since 2004. I miss-spoke. It actually surpassed the level of 2004 and reached the highest level ever recorded... at least since 1991 which is the limit of StockCharts' data set.

     

    stockcharts.com/h-sc/u...

     

    That was yesterday. this morning I saw it as low as 98. The wild, wild swings continue at an extreme pace. This is clearly showing us that there are a ton of stocks that are indeed teetering at their own 52 week moving average. Again, this does not portend anything overly sinister but it is definitely a big red flag saying that a correction of some sort is very likely.

     

    Now... back to the HO. John Lounsbury has (in his very cool way) asked us to stick to the topic on this insta. In that regard, by focusing a little bit lately on the number of new 52 week highs, I am (in a small way) veering off course. But I'm doing it because in the bigger picture of the HO, this wild activity in this one single component of the HO, is revealing some tremors. The market is showing some emotion, excitement, perhaps fear, perhaps greed. That's my goal here, to try to flesh these things out.

     

    In the overall view of the HO, it is nowhere near signaling yet. As you all know by now the number of new 52 week lows is an equally important component and it's not even on the radar screen today (nor has it been for a year). But I think it's fair to say that with a correction in the markets of perhaps 5%, we will undoubtedly see that number start to rumble as well.

     

    So in strict terms, the HO is nowhere near flashing a signal. In terms of one of it's components though, we're definitely seeing orange flags being raised. Something is afoot. It probably hinges to a certain extent on the GS situation and how that is handled, not to mention the spin we're hearing about Greece. The Greek situation is nowhere near being solved and it's only the first of perhaps 8 serious default threats out there. All other global indexes are at least correcting. There's no reason (logical reason that is) to expect that the North American markets will hold up in this scenario. But stranger things have happened lately, so we'll see.

     

    Y'all (in respect for my good buddy Doubleguns) might be very interested to know that the Russell's magnificent rally has been due in very large part to the regional banking index $KRX (whose members are included in the Russell 2000). The $KRX represents the end of the banking spectrum which is more or less opposite to the end of the spectrum that contains the major criminal mafia scum banks. (oops, did I let my personal opinion slip out?). What's really important is that this index $KRX had a very telling break-down yesterday... nothing overly serious yet or overly impressive except for it's wave form and momentum indicators which suggests a turn lower in that index is probably imminent. You might want to keep your eye on a 60 min. chart of $KRX due to it's major importance in the Russell.

     

    I apologize for veering slightly off course since this insta is about the HO, but I believe the info I'm adding is pretty closely related insofar as that it is waving flags at us. It's only a matter of the personal opinion of each of you what this means at this time, but the market is saying "look at me... pay attention". Happy trading folks... make lotsa money.
    27 Apr 2010, 10:47 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    My apologies...

     

    I keep having a mind-phart and sometimes mention 52 week moving averages when I mean new 52 week highs. I'm making that mistake because I also keep track of stocks above their 52 week moving averages for a different indicator I've devised for a different purpose. But the messages are the same... we're seeing seriously wild swings that are begging for our attention. I apologize, because it finally dawned on me that what I wrote must have been confusing. The gist of the message is still the same though. I'm heading out now to get some meds to correct my brain-pharting. Hopefully I'll be fine tomorrow.
    27 Apr 2010, 03:37 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - It's just a hunch, but I suspect that the chances of seeing a rise in 52-week lows will improve over the coming months as we move further than a year away from the March 2009 low. Most stocks shot up significantly in short order and it wasn't until summer that selectivity became much of an issue for investors. Along about June-July we should start to see the 52-week lows start to rise to a more significant number. I'm just not expecting the HO to be able to trigger until at least that time frame, if not later. But I'll be following your updates nevertheless because we all make mistakes and poor assumptions.

     

    I agree that we are likely to see another correction due to the European debt problems (it may have started today) but suspect that the politicians and media will find a way to downplay the situation and announce that everything has been "taken care of." But if Spain's rating cracks, it could be enough to set off a round of panic selling. But again, I don't see that surfacing in the news for a few more months. And that brings us back into the summer time frame. Sort of convenient, don't you think? And convenient timing for the elections, too. For the later reason I suspect that leaders will find some way to smooth the problems over at least until year end.
    27 Apr 2010, 03:58 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Hi Mark, nice to hear your voice. You bet, your hunch makes all the sense in the world. Keep in mind though, for the purposes of the HO all we need to see is 75 new 52 week lows. Today that number is only 10. But with a deep enough drop in the NYSE, the HO could indeed trigger much sooner than you're envisioning. I'm not at all suggesting it will though, just that theoretically it could.

     

    I concur 100% with your perspective on the situation in Europe. But admittedly, I seldom think in terms of things such as the upcoming elections. To those who think along more technical lines, those sort of events are a non-issue. But in fact they are an issue. It's funny you should bring it up. Here's a technical analyst who was on BNN at the very same time I was reading your comment. He kind of explains the way a technical analyst thinks. I hope this link takes you to the right story. It's titled "Market Wrap":

     

    watch.bnn.ca/commoditi...
    27 Apr 2010, 05:35 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Interesting video, AR. I keep an eye on some of the technical indicators and charts, however I am a fundamentalist at heart and can't help it. Picking tops or bottoms is impossible so I tend to try to get into a rhythm with trends. I miss the tops and I miss the bottoms but I try to take out what I can from within the trends. I have commented several times that I thought we would run into resistance at around 1200 on the S&P. So, I got out of most long positions, except those that I want to hold long term recently and am waiting to see which way the market will decide to go before getting fully invested again. So, I guess I try to pick tops or resistance and move to the sidelines. Maybe it's not the smartest way to invest and I certainly am not hitting them all out of the park, but I sleep well at night.
    27 Apr 2010, 09:48 PM Reply Like
  • Augustus
    , contributor
    Comments (2745) | Send Message
     
    A couple of interesting charts for following the general trend, not day trading:

     

    Nasdaq NH-NL
    stockcharts.com/h-sc/u...

     

    Nasdaq Ratio Stocks Above 50dma
    stockcharts.com/h-sc/u...

     

    Nasdaq Ratio Stocks Above 150dma
    stockcharts.com/h-sc/u...
    2 May 2010, 07:04 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Thanks for showing those charts Augustus. All of them are included in a vast array of charts I use in an attempt to get a general feel for the overall trend in the broader markets. In fact, I take the two lower charts you presented and combine them into a ratio, then plot it in chart form and overlay the Nasdaq behind it. The result is shown in the link below. It's produces a very revealing "quick glance" that doesn't leave much to the imagination. I do this for every index where the data is available:

     

    stockcharts.com/h-sc/u...

     

    But as you pointed out, these types of charts are of no value on a day trading basis, but invaluable for anticipating larger swings or corrections.
    3 May 2010, 12:33 AM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - If we see a continuance of the sort of action the markets experienced this last week for a few more weeks, we could see the HO trigger much sooner than I had considered possible in my earlier comment. However, if we look back to 2000 and 2008, we notice that a similar sort of volatility was in evidence and took much longer before everything actually unraveled into free fall. My point is that this process could take several months before the bulls give up the notion that this is more than a correction. On the other hand, it may actually be no more than a correction. In any event it will be interesting to watch how it all plays out. But, I must say, the volatile swings of last week are very reminiscent of former pre-crash activity. I sincerely hope that it doesn't last. But my gut tells me there are some monsters lurking in the deep just ahead that may come to the surface to feed.
    2 May 2010, 11:37 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    You could be right Mark. The elections could be hiding some sort of underlying agenda that we don't know about, like perhaps one particular day in the future has already been selected as the top. Who knows? I wouldn't doubt it and I don't pretend to know. So I just continue to do my own thing, searching for clues and trading accordingly. To be very honest, I'd love to be comfortable some day in being long the market. But at this point in time all indications are telling me to either be out of the market or to short it very soon. I jumped the gun a little bit there, since I went short a couple of weeks ago, in a minor way.

     

    In any event, you're right again... in that it will be interesting to see how it all plays out. It's times like this where I particularly appreciate technical analysis and indicators like the HO. I'm certainly not going to base my trades on waiting for the HO to tell me a correction is upon us. But for those who are comfortable being long, as long as it hasn't triggered I think they feel fairly comfortable. That's another reason I'm hanging around here posting updates... I just want to make sure that if it goes "offline" again, that I tell people. It's never failed in 30 years to issue a signal (not all were calamities either), but it did go "offline" for a while earlier this year and that bothered me until it came back on-stream. It just upset me a little bit that people might have been depending on it when it was broken. But it's working just fine now and we'll see how it responds in the near future. I'm pretty sure that the number of new 52 weeks lows is going to make some rumbling sounds in May and I'll be sure to let you know way before it triggers.

     

    Hope you had a great weekend and that this week is kind to you. All the best bud.
    3 May 2010, 01:10 AM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - Thanks for the cordial response. I have some short positions, mainly put on as hedges against loss on long positions originally. But I have since been getting out of most long positions and leaving myself short. I don't like being short all that much because the majority of the time long positions do better. However, when the bottom falls out of the market, short positions clean up in a hurry. So, with all that's going wrong in the world today, I'll probably stay with my shorts until either a new bull market appears to be taking shape or we experience a significant correction. Either way I'll be going back to the long side of the market at least until things get crazy again. I like my sleep.
    3 May 2010, 09:31 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    With the wild action we've seen in the past week and today's action in particular, I think this is a good time to make a comment or two. First of all, I know there are some people who are anxious to know how down moves like this affect the HO. So here goes:

     

    At this stage the HO is nowhere near triggering, but it's definitely making moves in that direction. Of course, the market could reverse and head back up tomorrow, negating some of these negative movements in the HO. But right now, we're interested in the larger and immediate picture.

     

    As I'd mentioned in past posts, the extremely wide range in the number of new 52 week highs was signaling that something was brewing. I'd suggested that the extreme high levels were unsustainable and sure enough, in the next day or two (Monday and Tuesday of last week) the market fell hard and negated those extreme highs. But that number fell all the way to about 90, right at the opposite end of the spectrum. At this moment that number is only 39 but it's cumulative and will grow throughout the day.

     

    On the weekend I mentioned that I suspected that the number of new 52 week lows would start to make some noises in May and that is now happening. It's nothing serious at this point with that number sitting at only 18 (yesterday it was 6), but what's far more telling is that the moving average I applied to it is revealing that an uptrend has definitely developed. As with the number of new 52 week highs, the number of new 52 week lows is also cumulative and will probably grow throughout today whether the broader indices bounce or not.

     

    At this point in time, the 10 week MA on the NYSE is still pointing upward, a requirement. I have my eye on it because last Jan. and Feb. that MA had turned south, negating the validity of the HO as an indicator (officially). I say officially because we need to respect the analyst who created it and respect his rules. But as I mentioned yesterday, I personally make my own decisions and if all other conditions are met but are negated by the fact that the MA had also turned lower... I'm going with my instincts. I'd also mentioned in the past that it's my belief that most of you have a keen enough sense that you're own spidey senses would have probably gotten you out of the market before the HO triggers. It will take more excruciating days like this to make the HO trip.

     

    Again, I know nobody likes a messenger who brings bad news. But far too many people don't even like a messenger who brings mere warnings. That's too bad, because people learn a lot more (and make a lot more money) by listening to all arguments and making their decisions based on that broader base of information. In that light, I want to show you a chart of the BOVESPA that a technical analyst friend of mine in Rio posted on another site. I show it to you because it reflects what most of the other markets in the world are doing. All we in North America ever hear about is what's happening in Germany, France and England. To a certain extent they have been propped up by ????? because their charts are damned near identical to ours. The rest of the world is telling the real story. Here's what it looks like:

     

    2.bp.blogspot.com/_OY0...

     

    This is what's likely to happen in North American markets. If so, aren't we glad we're not in Brazil or even worse, Portugal or Greece where the markets are way ahead of us (are in the midst of a hell of a correction or likely something more serious).

     

    I only post this chart so that we can see with our very eyes what a nasty market correction would look like. We could logically expect any drop in the NA markets to look *something like* the Brazilian experience.

     

    As I said in a past post, we really should perk up when we see the number of new 52 week lows hit something like 45, and we're clearly headed in that direction. (75 required). I'll post again when something further interesting happens.
    4 May 2010, 11:13 AM Reply Like
  • The shark
    , contributor
    Comments (159) | Send Message
     
    Rock,

     

    Hope all well buddy.

     

    You know we could make a small "annuity income" fortune by offering your obvious Technical analysis skills in South Africa. A website that offers a wide coverage of markets, assessments and summary of financial, social and economic events influencing the markets - a daily update, a weekly summation and a quarterly review and forward look for next quarter.

     

    It needs to be honest in that when the calls are wrong they are acknowledged and considered opinion given as to why it was wrong - that's how Investors learn. Too often Commentators give 10 opinions of which 1 works and they beat your head with the 1 telling you how "great" they are - ignoring the other 9.

     

    There is nothing like it here - all are much of a much - and really of no real value with little or no learning's'. I have a few ideas and believe it could be really valuable and most importantly make some very important annuity income.

     

    On the HO the market drivers seem balanced - good revenue /earnings bad sentiment due to PIIGS, POLITICS and SOCIAL UNREST. My guess is the growing SOCIAL UNREST will be the bigger longer term issue. In my book the "correction" will be 15-30% rather than a melt down.

     

    Keep the updates coming and thank you for the time you put into updating and sharing this important knowledge with us.
    4 May 2010, 11:39 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Shark, how are things in Cape Town? Don't tease me bro. If you're serious about the annuity thing send me a private note. My commentary on the HO barely scratches the surface of what I study, so if you truly believe that my viewpoints and analysis might be valuable in SA (South Africa lol) let me know. I might start slobbering on my keyboard now, so I hope you weren't yanking' my chain.

     

    And you're welcome. I'm just fulfilling a promise made to J. Lounsbury. A promise made is a promise kept where I come from. I can thank my dad for that (a Boston Irishman who moved to Canada when he was 3)... I never met a more loyal man in my life.
    4 May 2010, 12:01 PM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    Rocks: Appreciate your continuing effort. Over the past week or so I've been lowering my exposure. Foriegn markets tanking, the fact (SPX) has been above all the moving averages for the longest stretch of time since to 09' March lows, the big spill, bonds getting attacked, PIIGS running south, etc., etc., etc., has me fraught.

     

    I'm going to hunker in the bunker for the near term and start watching the Food Network.
    4 May 2010, 11:31 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Good decision Maya... and you're welcome. The way I see it is that the odds of at least one sovereign nation in Europe defaulting are growing with each day. The bond vigilantes make a gazillion dollars each and every time they have legitimate reason (legit in their eyes with morals and ethics cast aside) to attack any one gasping nation. They're foaming at the mouths with glee about all the targets that are lining up. It just makes logical sense that they'll pick them off one by one. The USA will very likely be the last target. So until the US is targeted, I think we can see rates on US treasuries remaining fairly low and the dollar strengthening. That would likely portend inflation in the targeted zones and deflation in the US for quite a while. But equities markets should fall in all markets.

     

    They should fall in the European markets in spite of an inflationary scenario (currency debasement) caused by massive borrowing rather than by printing (since they can't print their own currency). They would be falling basically because their economies are in deep, deep poo and are facing hellish rising borrowing rates. Equities markets should drop in the USA mainly because of currency appreciation (deflation). I think that makes sense too, considering that treasury rates aren't likely to rise too far for a while yet (for as long as US paper is perceived as some form of "safety net"). And inflation is normally kept under control by raising rates, another reason to believe rates can hold fairly low in the USA. I can't believe I'm saying this, but I think Bernanke is right that inflation is not the problem... for now.

     

    Ironically, even though the USA is printing like there's no tomorrow, none of that money is being loaned into the economy, where under normal circumstances it would grow the money supply on a geometric scale via the process of fractional reserve banking. 90% of all money is loaned into existence, so since they're not lending it, it basically isn't contributing to inflation as it normally would. So it appears to me that the table is set and the sequence is almost predictable to a certain extent. The bond guys must be drooling. I could have it all wrong but that's the way I see it for now. Food for thought at least. I hope I don't get booted off of here, because John would prefer if we stick more or less to the topic. And I agree with him, so never mind... don't bother reading this one.
    4 May 2010, 02:21 PM Reply Like
  • robert.b.ferguson
    , contributor
    Comments (10491) | Send Message
     
    AR: Greetings. I don't know about the larger bond holders but the small frys like me are for the most part out of soveriegns altogether. I have reduced my bond exposure considerably and used the proceeds to buy equities. I now own mostly corporate high yeild notes and some very solid TE Munies. Most of the bond folks at the same scale as I am are positioned similarly. Bond markets are strictly for the big guys for the forseeable future as no debt issuance seems to be beyond default.
    4 May 2010, 06:56 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - Good, thoughtful and thought-provoking comments. I've been thinking along the same lines. All that is going wrong in the world has me a bit jittery. I've turned even more cautious that usual. I only have two long positions left on the table and I have an equal number of short positions. The volatility is one of the key factors for me. If it keeps going like this into next week, I'll probably add to my short positions or start some new ones. If the HO confirms my instincts, fine. If not, but I still make some money, so what? This same sort of volatility preceded the last two major bear markets. This time I'm paying more attention.
    4 May 2010, 02:41 PM Reply Like
  • FocalPoint Analytics
    , contributor
    Comments (6282) | Send Message
     
    Hi Rocks… While viewing the news last night, I saw officers in the Greek military participating in the protest marches…. So at least part of the military is actively protesting against their own government… That looks like a black swan to me.

     

    I am now wondering if the demanded rapidity of the Greek austerity program was actually designed to induce a default and/ or a revolution?
    4 May 2010, 03:09 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    User... is that you under that green visor? Man, haven't chatted with you for a long, long time. I hope you're well. Now you're talkin' conspiracy theory... which is right up my alley. You bet, the "rapidity and panic" theme was also prevalent during the Lehman collapse. Remember how frantic that was? That's one of their MOs, to cause panic, then offer the solution. Same with the flu malarky. (I got my character slammed real good for saying that 6 months ago but it's still as true today as it was back then). I wouldn't trust the IMF as far as I could thrown them, considering who the power brokers are inside it... the same people who own and operate the entire global banking cabal. But in respect for Johnny's request and out of realization that some readers here think I'm a lunatic because I have what they perceive to be radical views (based on documented evidence most of the time I might add), I don't think I'll say much more about that topic here. Except to say I think you're onto something Mr. Mouse.
    4 May 2010, 03:23 PM Reply Like
  • The shark
    , contributor
    Comments (159) | Send Message
     
    Hi Rock,

     

    You bet. Not sure if this is protocol but email me johncook@kingsley.co.za
    4 May 2010, 05:12 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Mark and I were talking briefly about the number of new 52 week lows being established. Indeed, it is making noise so I thought y'all (where is doubleguns?) might appreciate seeing what I'm seeing. So here it is in chart form:

     

    stockcharts.com/h-sc/u...

     

    It will be interesting to see how tomorrow's bounce (man, I hope there is one. At least I fully expect one lol) affects the charts of market internals (which got crushed today) and those of the components of the HO. I'll let you know for sure. Gotta run now. Have a great night all.
    4 May 2010, 05:20 PM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    Alberta, you da' man.

     

    I haven't been around much lately, matching my feelings that the market is just so far out of my control/logic it may be best (for my mental health) to ignore it for awhile.

     

    Today, watching the Dow, I started wondering about HO and thankfully, caught a link to John's/this thread.

     

    I'm so happy you are giving us your insights, rock on man!
    4 May 2010, 06:12 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Tanks TE. It looks like today's trading is going to get off to a rather nasty start according to the futures. So there will likely be something happening with the HO today... not a signal, but we'll probably see that number of new 52 week lows scoot up a bit. I'm not sure because we haven't really seen much action in that component for over a year so I don't know how fast it could move... very fast would be my guess. It sure moved up sharply yesterday. You can see that in the link above your post. We'll see. By the way... that link is dynamic. You can click on it throughout the day to monitor the action yourselves (I think it's still dynamic even after I've posted a link). Rock on girl... lol
    5 May 2010, 09:14 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Ok, it's time to sit up and pay attention because as expected, the number of new 52 week lows is accelerating and is now at 42.

     

    Remember a few posts above, I was mentioning the severity of the range of swings in the number of new 52 week highs? Today that number has only reached 30, so low that it invalidates the HO. This is not a huge concern yet since that number could climb further today and the other requirements of the HO have not all been met anyway. But there's no doubt, she's rumbling big time.

     

    stockcharts.com/h-sc/u...

     

    We also need to keep our eye on that darned 10 week MA of the NYSE which must be rising in order for the HO to be valid. At this point, it's barely hangin' in there (barely pointing up). I hate when that happens. The rules set out by the designer of the HO are pretty darned strict, but he did it for a reason. Let's just continue to monitor and see how it pans out. But at this point we need to pay attention because an actual signal (if it happens) "could be" warning us of a very large event. Not all HO signals have resulted in a "crash" either, so as always, your own good spidey sense and DD must be thrown into the mix.

     

    The other day I posted a chart of the BOVESPA just to give you a picture of what most of the other global markets look like. I'd mentioned that our media more or less limits our world of info to the Frankfurt, Paris and London exchanges. But even those are cracking now and we're lagging. Here's what Paris looks like after last night's action:

     

    stockcharts.com/h-sc/u...

     

    It'll be interesting to see if the Greek market drops below its March 2009 low. It's almost there already as you can see in this picture:

     

    stockcharts.com/h-sc/u...

     

    I'll keep you updated, but for now if you like you can keep tabs on the number of new 52 week lows yourself by clicking on the top link here. I believe it's dynamic on your end too (but I'm not certain about that). Someone can maybe let me know if it updates automatically for you as well. Right now it's stuck at 42. If that number changes today or if it updates tomorrow, then you'll know it's live and active for you as well.
    6 May 2010, 12:31 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - I tried the update button but it stayed with yesterday's reading. I think we will need to sign up and log in to get the daily charts ourselves. Thanks for the lead and update.
    6 May 2010, 12:46 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Mark, that number just changed to 43. Please click on the top of the 3 links in my last post and tell me if you see 43. If you do, the chart is dynamic for you as well as for me. When you clicked on the update tab, you may not have seen a change because it hadn't changed yet (it's been stuck for a while because the market stopped dropping for a bit). If you were referring to the upper link of the 3, that was today's number, not yesterdays. So please try it again... I have a hunch you'll see 43 now. Tanks :-)
    6 May 2010, 12:58 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - You are correct! It did update for me. BTW, have you noticed that there are a couple of gaps that need to be filled on both the NASDAQ and the S&P? The lower gaps occurred about mid February. The S&P needs to get below 1078 to fill that one.
    6 May 2010, 01:07 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    I sure did. Actually those were pointed out to me by other TA guys I chat with. A lot of people aren't even aware that gaps tend to be filled most of time. I'm glad you're a sharp old fart. lol No disrespect intended buddy, I'm probably older than thou.

     

    I'm real glad that chart updated for you Mark. That means all of you can watch it "live" and see what I'm seeing. Thanks for checking.
    6 May 2010, 01:10 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    I was born in the 40s.
    6 May 2010, 01:12 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Me too... just barely squeaked in there. I'm assuming you're referring to the 1940's and not the 1840's? I'm referring to the 1940's. lol
    6 May 2010, 01:14 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Same here.
    6 May 2010, 01:14 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Holy smokes! The number of new 52 weeks lows has surged. It now sits at 72 and only 75 are required. The other requirements are not quite there. The number of new 52 week highs is now too low and does not seem like it's going to rise much today since it stalled at 30 early this morning. No new highs have been attained since that hour (as you could imagine).

     

    So stay tuned... the HO is getting very close to triggering but due to the low number of new 52 week highs, it won't trigger today. This is what I was talking about, a month or two back when I warned that it would likely take quite a hefty drop in the markets to get this thing to trigger. Keep in mind that the rules also say that it must trigger twice within a 36 day period. They can be consecutive or 35 days apart... anything in there is valid.

     

    14:1 DECLINERS!

     

    FOLKS THIS IS PROBABLY FAR MORE SERIOUS THAN JUST A BIG SELL-OFF ON A "BAD DAY".

     

    Believe me, I don't want to see this and I don't want to sound alarmist. But it's almost certainly far worse than mutual fund managers are likely telling their clients. OMG, check out the new 52 week lows chart now:

     

    stockcharts.com/h-sc/u...

     

    See that green dotted line? That's the required number of new 52 week lows. I has been attained. But as I said, due to the rules of the HO, it can not trigger today because the number of new 52 week highs is too low.
    6 May 2010, 02:29 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Wow! I went for a walk with the S&P hovering around 1150 and when I come back it's at 1123! Thing is, the day is not over yet. If we get a further melt down in the last half hour things will be very ugly. But then, are we setting up for a rebound tomorrow or will we just be flat while folk digest and take a deep breath?
    6 May 2010, 02:43 PM Reply Like
  • smarttogether
    , contributor
    Comments (82) | Send Message
     
    Holy crap! Glad I dipped my toe into shorting the market a few days ago - although I'd be okay with it going up a bit so I could short with more of my money at a lower price.
    Thanks again AR for your hard work and updates - from a fellow Albertan.
    6 May 2010, 02:48 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Welcome aboard smarttogether. You have no idea how happy that makes me (happy that you were paying attention but unhappy about what I'm foreseeing here). You're welcome. Are you willing to tell me if you're close to Calgary?
    6 May 2010, 02:51 PM Reply Like
  • smarttogether
    , contributor
    Comments (82) | Send Message
     
    Edmonton - sorry AR, but I think there's a law that says we must hate everyone from Calgary! ;)
    6 May 2010, 02:57 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Edmonton! That's far too close to Calgary. LOL
    6 May 2010, 03:11 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Well, today may have been the end of a 12% correction. I didn't pick up much as I'm still trying to be cautious and because I want to see how the rest of the week goes.
    6 May 2010, 03:56 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Mark, if the HO triggers, I'd urge you to re-consider going long although you folks have a great talent for finding winners. The the whole message behind the HO is that the current might be changing direction and it's damned tough to swim against the current. But of course, at this point we don't know for sure. You're a wise dude to wait and see how the rest of the week goes.

     

    I hate to do it, but I've gotta run to a previous commitment. There's a lot to discuss... like the damage done to market internals. It's a disaster to be quite honest. For example pull up a chart of $NAA50R. It doesn't update until about 6:00 eastern and won't be able to see it until 9:00 (eastern). But I imagine it's going to be a real eye opener.
    6 May 2010, 04:19 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    That should have read: "It doesn't update until about 6:00 eastern and I won't be able to see it until 9:00 (eastern)."

     

    Those of you who want to check it out can see it at about 6:00 ET.
    6 May 2010, 04:42 PM Reply Like
  • robert.b.ferguson
    , contributor
    Comments (10491) | Send Message
     
    Baron's is reporting that today's sell off was caused by a trader at Citti (C) who wanted to do a million share basket trade. Poor individual plugged in a billion instead and with the stroke of a key incinerated a billion dollars of other peoples money as the broader market instantly went into panic mode. Accenture (ACN) was trading at $0.01 and Proctor and Gamble (PG) was under $40. I wonder if the poor sap will still be employed after this shakes out.
    6 May 2010, 05:07 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Only if Citi made a profit. I can't imagine this won't hurt their trading desk profits a tad.
    6 May 2010, 06:14 PM Reply Like
  • smarttogether
    , contributor
    Comments (82) | Send Message
     
    Amazing how a story is instantly put out to offer an explanation for the melt down. It can't possibly be related to the orchestrated rally of the past year, computerized trading, nervous investors, fear and panic, sovereign default risk - or any other real and negative thing. No, this is an isolated incident caused by some poor sap who hit the wrong button on his keyboard. Nothing to see here folks, move on...
    6 May 2010, 06:36 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Good point! Unless we see an arrest and admission of guilt on the part of Citi (with a big juicy fine since they are responsible for employee actions), I'm not 100% certain what I'll believe.
    6 May 2010, 07:19 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    That story is pure hogwash. They've simply provided a very convenient "reason" to rationalize what happened today and to calm the panicking public. In truth, it's all about the fact that Europe is on fire causing a very hefty demand for the American dollar and an absolute massacre in the Euro. This is more or less the deflationary scenario for the USA that I was referring to in the post above dated May 4th. And it appears it's only getting started. The risk of default in at least a half dozen European countries tonight is probably triply as likely as it was only a week ago. This is very, very serious.

     

    HFT was definitely involved here and as far as I'm concerned this event clearly proves my hypothesis that there is no bid under this market (other than the same manipulators who've engineered 24 green Mondays out of 27. And when they decide to sell, or are forced to sell or their machines go bonkers this is what happens). How else could it have fallen from down 2% to down 10% in a matter minutes? If there were buyers that simply could not have happened. What we witnessed today was an absolute freefall that the bankers damned near lost complete control of. I don't believe for a second that they will be able to continue to control it as we move forward from here either. We should be furious about the artificial ramp-jobs we've been witnessing for the past 6 months at least that brought the market to this place, because they virtually ensured that a normal correction was no longer an option. At least I am. Dropping 10% in one day and recovering 7% is so far from normal it isn't funny.
    6 May 2010, 09:37 PM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    Saw a great chart of the spike down in the euro about 30 minutes prior to the anomaly, being mirrored exactly by the downward whoosh in the DOW....the supposition being that "someone" got creamed in ForEx and was force-selling equities to cover, triggering more program selling.
    6 May 2010, 09:49 PM Reply Like
  • Augustus
    , contributor
    Comments (2745) | Send Message
     
    I will not believe that Billion Share line until I hear Citi admit that it was them. I just don't believe it occured that way. Last report i read from Citi was that it was not them. It seems to be more along the lines of Blame it on whomever the public believes is the biggest screw up.
    7 May 2010, 01:02 AM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    Who is going to play the short ETF game tomorrow?
    6 May 2010, 06:54 PM Reply Like
  • smarttogether
    , contributor
    Comments (82) | Send Message
     
    Already have some money in TWM and waiting for the HO to trigger before getting more aggressive. Also am waitng for one other deal to be settled before most of my cash is free again.
    6 May 2010, 07:09 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Well, I've still got some SKF and a little SRS that I'm going to let ride until I see something that makes sense. I'll wait until I see where the futures are heading in the morning before I add any more.
    6 May 2010, 07:20 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4046) | Send Message
     
    Author’s reply » Maya - - -

     

    I closed the day holding SSO and QID. Will decide what trades to consider tomorrow after the market opens.
    6 May 2010, 11:57 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    Maya I've traded triples for a long time now, sometimes successfully and sometimes not. The one thing that I was always guilty of was investing too much cash and then not being able to bear the pain of being wrong even for a day. I'd sell at a loss only to be proven right the next day when the market went the direction I thought it would... without me. It's fantastically lucrative if you get that magic pinpoint entry, but excruciating when you're wrong, even if only temporarily wrong. But they're fun as heck if you invest a tiny amount initially, then the second you have profit in it, place a stop to protect that profit and buy some more. You can make $21,000 in a day that way. lol You can also lose that much in a day if you're an idiot. Trust me :-)

     

    Best of luck big guy. It's gonna be an insanely volatile period over the next many, many weeks.
    7 May 2010, 01:07 AM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    I'm just a little bit aggravated that our government has done zippo about protecting us little investors. Transparency? No! Line by line reading of bills? No! Giving how much more money to Freddie? Yes indeed, that happened today.

     

    Then there is the fascist ruling about the Internet?

     

    Raise taxes on dividends? Likely gonna happen.

     

    Not verified yet, but the 50% taxing of money leaving this country.

     

    Dreams going down the toilet. Plunger not needed.
    7 May 2010, 01:57 AM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    Neiderblahblah (can't spell it offhand) offers that the trade(s) involved happened in milliseconds and could not have been manual. Also that up to 12 stocks were involved. So HTF it is.
    6 May 2010, 07:00 PM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    Oh, and that his exchange security stops closed trading for 90 seconds (I think), during which time the computers re-routed to an electronic exchange (apparently Nasdaq) for execution.
    6 May 2010, 07:05 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    The HTFs know the kind of power the hold and now so does the world. Even the politicians can't help but realize that such an inordinate amount of power in the hands of relatively few could spell disaster. Let's see what wisdom our leaders will come with from all this. The show should be more entertaining than the trading that starting it all.
    6 May 2010, 07:29 PM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    Mark I truly believe our politicians think they control the beast. Only explanation I can come up with that makes sense.

     

    Until we wake up and follow the dollars, right back to our elected officials and their friends/families/ supporters pockets, the outright fraud and theft is going to continue unabated.

     

    Well, until it can't continue anymore that is.
    6 May 2010, 07:53 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    According to the Mayan calendar 2012 will mark a new beginning; a sort of reset back to the beginning. I sure hope they're right. I'd really like a government based upon the constitution again. We'll have our chance again in 2012.
    6 May 2010, 08:00 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    It almost happened today! Came within a whisker.

     

    Ok, now that today's excitement is over and we can breathe, I think this is the best time for all of us to look at a summary of all the conditions necessary for the HO to trigger. There's even one question that neither myself nor Michael Eckert (read J. Lounsbury's words in BOLD at the very top of this insta) know the answer to. I've discussed it with Michael and he simply doesn't know. Neither do I. But you know what? If my hair is on fire I'm not going to spend a lot of time questioning whether or not it might be detrimental to my health. Here is what's required for the HO to trigger and where we stood at the end of today. In the summary below we will also address the issue of the one question that neither I nor Michael Eckert know the answer to, but as I said... who wants to quibble when the topic is damned near a moot point?:

     

    1. The number of new 52 week highs and new 52 week lows pretty much swapped places in the past three short days. The number of new 52 week lows must be greater than 75. Today that was achieved.

     

    2. The number of new 52 week highs must be greater than 75 but not greater than twice the number of new 52 week lows. That was NOT achieved today because the number of new 52 week highs didn't even have time to breath. That number did not even hit the required 75. As it turns out, THAT IS THE ONE AND ONLY ITEM THAT PREVENTED THE FIRST (of the required two) HINDENBERG OMEN SELL SIGNAL TODAY.

     

    3. The MacLellan Oscillator must be negative on the day of the HO signal. It was negative today.

     

    4. The 10 week MA of the NYSE must be rising. It was rising today. Here is the question that Michael Eckert and I have discussed: Does this rule dictate that the "weekly close" must be included in this trendline, or can any intraday reading qualify? You know what? Who the hell cares because if all the other ducks are lined up in a row and the market is in freefall it just makes no sense to quibble about that. What if in the future a sell-off like this starts on a Monday? Who in hell is going to watch the market fall 2% per day while waiting for Friday to arrive? Not me, that's for damned sure.

     

    5. After the first HO signal, we must get another within 35 days.

     

    So that's where we sit tonight folks. Tomorrow is another day and the HO starts afresh. IOW, the number of new 52 week highs and the number of new 52 week lows are reset to zero and we do it all over again.

     

    Again, I urge all of you not to depend on the HO for the simple reason that today, once again it came very, very close to being nullified by that MA on the NYSE weekly. In fact if the market were to open sharply lower tomorrow, it's possible that that average could turn down before the other conditions are met tomorrow. So just in case this is the one time when it fails for the first time in the past 30 years (or more)...

     

    DON'T RELY ON IT TO TELL YOU WHEN TO BAIL OUT! A SHIP CAN STILL SINK EVEN IF IT'S ALARM BELL IS BROKEN.

     

    Let's just hope the market pops sharply tomorrow and the issue of that MA once again solves itself.

     

    In summary.....WHEW!!!!!! Expect outrageous volatility over the next many days... in both directions.
    6 May 2010, 11:46 PM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    If this whole thing tanks again, I'll just have to double up again. Or, at least try.

     

    Before, I was principled about using a leveraged short ETF; "I'm not going to contribute to the market slide," I had thought.

     

    Not this time.

     

    It would not surprise me at if the corrupt leaders of our puppit politicians are all on conference call now talking about more devious schemes to separate us little folks from our money.

     

    Last night on Kudlow, Larry was talking up about how some politicos on finacial comittes were shorting Lehman, intimating the scoundrels had inside knowledge of Lehman before Bernanke and gang took Lehman down.

     

    My GOOOH placard: Let the pot smokers out of jail; make room for the politicians!

     

    P.S. I wrote this some 6 hours ago and for got to submit it.
    7 May 2010, 12:48 AM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    Bulls couldn't take control of the markets this morning, even after the strong employment report. The QQQ is down over 1% and leading the way. Somehow, that doesn't make any sense to me. I would have expected the DOW and S&P to lead with heavier weighting in financials, especially, and large caps in general. Tech should weather the storm better, IMO.
    7 May 2010, 10:20 AM Reply Like
  • John Lounsbury
    , contributor
    Comments (4046) | Send Message
     
    Author’s reply » Mark - - -

     

    People are still trying to get out. If this market can not move up this afternoon, Monday and Tuesday MIGHT be ugly. Right now Dow -75, Nasdaq -30 and S&P 500 -8 are not strong enough to calm those still hearing a shout of "Fire".

     

    I have lost about 1.5% yesterday and today trying to catch some falling knives while using some short positions to off-set. I'm backing off and will probably miss part of a 5% + bounce which can come at any time. Right now I'm holding SSO and DIG and I'm slightly underwater (less than 1% on) each.

     

    Ooops! The market just bounced and I'm net even (slighly up on SSO and down on DIG).
    7 May 2010, 11:56 AM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    John: Remember how we both joked about getting creamed last June? Move it up a month.
    7 May 2010, 03:33 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    John - I was up earlier but am down a little right now. That's how it goes. I have most of my accounts in cash waiting for this to shake out.

     

    BTW, have you checked out Users insta about the oil spill. He seems to be uncovering some interesting articles. If any of it is more accurate than what we are being told, this thing could end up being the equivalent of the Dust Bowl for the gulf coast and much of the eastern seaboard. Here's the link:

     

    seekingalpha.com/insta...
    7 May 2010, 12:45 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    As of 1:15 ET there are only 41 new lows and 9 new highs. Neither one is within the criteria at this moment. If the market were to move up, we probably wouldn't end up with the required number of new lows. And conversely, if the market moves lower we'd have very little chance of hitting the req'd number of new highs. So the odds of the HO giving a signal today seem remote no matter which direction the market takes.
    7 May 2010, 01:18 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - I can't help but think that we will see a rally in the next few days and then some jigsaw, sideways movement for several weeks. We're either topping or building a new base. My guess is that we are topping, but that would also require that the market be free of propping and manipulation. So, anything could happen. However, we may have enough stocks near enough to their lows and other near enough to their highs that we could see some divergence ans investors become more selective in their stock picking. The momentum crowd will help on the upside. So, I wouldn't count the HO among the dead just yet. I know you're not. But others may and that could be a mistake.
    7 May 2010, 03:39 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    G'day Mark. Yes, one would certainly think that a bounce is due considering how the market has suddenly become very oversold on a relatively short term basis. On the larger picture though, it's not even close to oversold which suggests that over the longer time frame the drop in the markets is far from over. In fact, on a daily and weekly chart, the market is still way overbought. But it certainly stands to reason that we could expect a rally sometime over the next few days. But I personally suspect it would only be a bounce rather than a resumption of that incredible run-up from the Mar. 2009 lows. In fact, keep your eye on the possibility of a massive head and shoulders developing in the American indices over the next month or two. We'll have to see if it develops, but it would be a fabulous pattern that most investors of the calibre on SA know how to use.

     

    From the tech. analysis perspective, the market is sure giving signs that it'll likely be dropping or bouncing around for at least a few weeks. And on the global scene, there's just so much negative news developing out there including the growing dangers in Europe that I can't help but get the sense that the world is not very happy right now. (You and I are happy, but the rest of the world isn't lol). You yourself noted that Europe was on your radar and that you suspected that the bad news out of that continent could become worse. You're were right on the money. With that in mind, I put together a chart to show you the difference between the Paris CAC Index and the S&P 500.

     

    It's my personal opinion that since most of the other indices in the world are cracking badly and that since we've been a laggard rather than a leader, our markets should follow what the others are doing. The fact that the American dollar is showing stellar strength is no shock to me. It's all about deflation or credit contraction or the destruction of money... whatever we want to call it. But it's the opposite of the decades of credit expansion that we've all become far too used to. This is a secular change we're witnessing... of monumental proportions. For those of you who would want to argue that point, I simply say "when was the last time you saw Europe on the verge of bankruptcy? When was the last time we witnessed the FED printing so much money... and yet no inflation?". That's clearly all about the purpose for which that money is being printed. It obviously has not been created out of this air for the usual purpose of lending into the economy.

     

    The last thing in the world I want to do is to make a brazen "market call" and be worng. Besides, who am I other than a just an amateur student of technical analysis? And not a very good student at that I might add, because I've been at it for decades and have never once been able to achieve 100% on the exam. But I can get my point across without making any bold prediction verbally, but simply by showing you this chart and by disclosing that personally, I'm still short. I'm also fully prepared for that bounce that we suspect should be coming. Keep in mind that nearly every other index in the world looks like this or worse (except the $TSX, which is so closely tied to the American market):

     

    stockcharts.com/h-sc/u...

     

    So take a look at this chart kiddo and continue to keep an open mind as you always wisely do. I hope you (and all) have a stellar good weekend.
    8 May 2010, 11:24 AM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    John and Rocks:

     

    Here a little piece just written in Quick Chat by my alter ego named, "Copan." (The avatar of Copan is Waxaklajuun U'bah Ka'whiil, the 13the king of Copan)

     

    ####

     

    Us Mayans love the numbers. So let's crunch some.

     

    Jan 19th, of this great year there was an intraday S&P 500 high of 1150. On Feb 8, the largest pullback since the 2009 March lows gave us a 7.74% drop and we rallied off 1065 to hit April 23rds intraday high of 1216.

     

    Since that date the S&P 500 has tumbled to 1113. To drop the same percentage of the previous drop (7.74%), we would have bounced at 1126.

     

    Well...we're through that number. Besides, Mayascribe told me that November 26th is the birthday of "the one that got away."

     

    So let's look at a psycological 10% drop. This gets a tad interesting because we would arrive at 1094, which, ironically, is exactly the next support level down. A mini drop we bounced off of on Feb 24th.

     

    However, if you bring up a six month S&P chart and draw a line starting on July 10, 2010, and connect it with the 1055 close that day, and extend it out to today...ah ha! We have a straight line! Giving us support right where we are standing now at S&P 1113. The Maya love the number 13! But alas, since starting to write this we've dropped to 1111. So we've further yet to drop.

     

    My ancient gut tells me that 1055 is THE support line, and will be filled before we start to take off again.

     

    By the way, since we're talking numbers, in 2010, "Maya" happened to be the 55th most popular name. 1055 makes sense!

     

    ####

     

    Hoping Copan's logic is sound. I would hate to see what would happen if we drop below S&P 1055.
    7 May 2010, 03:44 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4046) | Send Message
     
    Author’s reply » A new Hindenberg Omen Instablog has been started at seekingalpha.com/insta...

     

    From now on there will be a new Instablog each month for the HO until there is no more interest shown in following it.
    7 May 2010, 08:44 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7201) | Send Message
     
    AR - I agree with all you have said. Thanks for the chart. It makes a very stark comparison and provides some potential insight into the future of the S&P. I am net short right now as well, but keeping my positions small until I get a better "feel" for the trend; most in cash.
    8 May 2010, 12:22 PM Reply Like
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