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
The comments below were contributed during the month of August. They are a continuation of a discussion led by reader Albertarocks. The preceding blog for July can be read here. For further reference, see the original post.
Disclosure: Long several S&P 500 stocks as well as long and short positions in Nasdaq stocks.
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I'm tracking two scenarios at the moment based on a pair of alternative intermediate-term cycle counts. The first possibility is based on the last cycle low having occurred on July 2 and suggests that the current rally will continue until the end of July before potentially rolling over:
The second one is more bearish. If the last intermediate-term cycle low actually occurred in early June, then the next reversal can develop as soon as next week:
If stocks do head lower starting next week, that would be a huge bearish signal, indicating that a break to new long-term lows is imminent. On the other hand, if stocks continue to consolidate at current levels or even move higher, the rally from early July will likely extend until the end of August, at which point markets will encounter another telling inflection point.
Charts do not always contain an urgent, compelling message, but when they do it is imperative to listen. We have come to one of those critical long-term inflection points and it is time to pay close attention. All JMO, of course!
"The first possibility is based on the last cycle low having occurred on July 2 and suggests that the current rally will continue until the end of *August* before potentially rolling over..."
Three trading days in, August has been relatively quiet with stocks holding near recent highs, which would support the scenario that has the rally from early July continuing until the end of the month, if only via a sideways chop. However, the rising wedge formation continues to indicate that a sharp move lower remains a possibility over the next five to seven trading days, especially given the low volume underlying the advance:
We'll need to see how stocks behave after exiting the rising wedge, which has compressed to a relatively narrow range from about 1,110 to 1,132 on the S&P 500.
This link has an interview with Gideon Gono. My take on this is that Zimbabwe started hyperinflating due to no access of credit. So as long as the bond market isn't collapsing (and it doesn't seem to be collapsing) there will be deflation.
The markets are currently sitting right on top of rising support trend lines (darned near every sector is right there). The Russell has fallen through its own with authority and the banks are sitting right on top of theirs too (XLF). The bond markets close at 3:00, after which it's possible that we could see some fireworks. I'm not predicting that, just giving a heads up.
If that happens, we could get the first HO signal today. All we'd need to see is the number of new 52 week lows rise from the current 27 to 75. That could happen in a heartbeat if the market decides to tank later today.
An interesting surge of buying came in during the last 90 minutes of trading, bringing the S&P 500 back up to support at the lower boundary of that ominous rising wedge. Just a little bit of tape painting, and a strong indication that market players have a close eye on that formation. A break well below about 1,116 would have been a meaningful bearish signal.
Yeah, I read that backwards. The surge that started to accelerate precisely at 3:00 appears to be a case of 'the mice will play while the cat's away'. One more hour of fun while the bond market wasn't looking. The FED is buying both markets, probably with that $1.5 trillion they stole by issuing more treasuries than required (without telling anybody and spending that money somewhere without telling anybody). Oh well, I suppose we shouldn't be surprised after that amazingly 'bullish' jobs report. Having said that, it's never a good thing when more volume has been pouring into falling stocks than rising stocks for 7 of the past 8 trading days.
More technical damage was piled on today, not reduced so I'm looking forward to getting the data after 6:00 that will show how much more damage was done to my most reliable indicators.
Monday could well be 'payback time' for these evil mice because this type of manipulation never ends well. What a potential bull trap. OMG these minions are incorrigible. The treasury markets are really sending a bad signal... take a look at this:
I'm sure you're right about which way it will resolve this time. As you know, the bond market absolutely dwarfs the equities markets and as such more or less dictate the ultimate path for equities. The equities markets are like the little dog on the leash weaving back and forth from one side of the sidewalk to the other, sniffing every other dog 'evidence' he comes across.
But the path of the sidewalk is pretty much already determined and the bond market is on that sidewalk holding the leash... knowing exactly where it wants to go. The little dog has no choice... it's going where the big powerful bond market dictates. The only caveat to that is that I'm very concerned and suspicious that the FED is buying both markets. It should rightfully be buying neither. In that regard, this ratio might be distorted due to FED intervention. Regardless of who's causing it though, this distortion must correct. The bond markets will ensure that it does. It might be China. It might be the super powerful (and destructive) bond vigilantes. It will be somebody.
I've changed the chart to a weekly basis and expanded the time frame so you can see what's happened since just before the market top in 2007. This broader view shows the severity of what I'm talking about here:
But it's true enough, in the past we have seen a divergence such as this continue for many months on end. But why it's happening now, when there are record amounts of money leaving equities funds and going into the bond markets is a bit beyond my comprehension. It's just illogical to expect the stock market can continue higher when the bond markets dictate otherwise. Today that ratio is stretched even further than it was back in October '07. That's basically the point I was trying to make by posting that chart. That ratio is at an extreme, like an elastic band stretched very near to its limit. There will be a reaction... either the equities markets will correct sharply to the downside, or interest rates are about to surge. That too would cause stocks to drop in a heartbeat. Stocks can't win this battle.
Today, the trend of $TNX is very clearly down. If it were to reverse, it wouldn't be because the equities markets are leading and the bond markets must obey. It would be because of some fundamental reason for 10 Yr. treasuries to fall (causing $TNX to rise). And I don't believe that's in the cards when the FED seems determined to buy treasuries in light of the fact that the regular customers have gone on strike. It appears to me the FED has a goal in mind and won't likely change it. However, China may well have something to say about that. If QE2 were to be announced officially, I believe we'd see a reaction from China almost instantly... a reaction that would be reflected in the interest rates market as quickly as overnight. I doubt very much that the FED is willing to take that chance. It sure appears to me that they're trapped. In any event it's a very interesting relationship to study. I'm rather tickled that you found it interesting enough to address.
Stay tuned because the Omen came relatively close to flashing a signal today. Had the current rising channel lines been breached, we would have almost certainly got the signal. You may recall that back in late April we had two such "near miss" instances one week apart. Today was the first "near miss" since then. Of course "near misses" don't count but they do show that the current market atmosphere is volatile and conducive to producing a signal .
I hope you're enjoying a great weekend... and thanks for your comment and interest in the topic of this ratio.
Thanks for your interest in the topic contained in my above comment John. I have adjusted the chart to reduce the opacity of the candlesticks (the ratio) and emboldened one of the trend lines... all in an effort to make the chart slightly more 'viewer friendly'. The improved chart is here:
Thanks, AR. Those charts are revealing of the manipulation taking place, imo. Astonishing. I wonder what will happen when Congress finally does a full audit of the Fed, come 2011...
The issue with the HO being 'broken' is no longer a concern in the slightest. There is plenty of room now and it should say on line for weeks and weeks with no problem:
Thanks Mark! I know you've always been interested and that's greatly appreciated. I never offer any of my stuff out in the main body of SA anymore since I more or less lost interest in participating much on SA late last year. In fact as long as John keeps offering his office as a place where I can display some of my work, I just seem to keep doing it in his office. lol
I don't know what I'm going to do if the HO ever does it's thing thereby rendering these HO instas a moot point. I don't particularly care to set up my own instas in order to try to convince people of the way I think the markets are going to be going. Nobody asked for my opinion and it's not my business to try to convince people of anything. But for John and for the few remaining souls who come here occasionally, I feel quite justified in doing it here. But once the HO is triggered, I may not post again for months and months... or may never. Who knows? I really was that turned off a while back and the general interest and enthusiasm I had back then has never returned.
Thanks again buddy. I wish you the best as always.
After the HO triggers and we have a ride down, it would be really helpful if someone could develop a Rainbow Omen to let me know the storm has passed and I can stop shorting and invest long term again. :) Seriously though, how should I time this? Is there a % drop to expect? How long should the drop last? Any indication from previous HO events?
Smart - I am as anxious to hear a good response to that one as you are. I suspect, though, that we will have to watch the market action around the multiple support levels and either add or lighten up our short positions accordingly. If the market drops below the 2009 low of March, it's going to be hard for me to find a reasonable support level below that. The problem I have had with the March 2009 low was that there didn't seem to be a real capitulation day filled with panic selling. That is what usually happens (in my experience) when we set a long-term bottom. Often there is a day with capitulation in the form of a gap down on really high volume and then a reversal sometime in the afternoon. That signifies that the true value investors are coming back in with conviction. If we see that somethings like that, where there is not an immediate claim that someone made a wrong entry, and the volume is massive with lots of orders in all sizes it would likely be a bottom.
I'm actually thinking about starting an instablog for technical analysts who are more adroit at reading the charts and other indicators to discuss this very topic. I won't start it until after we see the HO event (assuming that we do) and will invite those whose insights I trust and rely upon. I'll probably call it something like: "Where's the Bottom?" Here's hoping you find it and that it does us all some good.
Mark, if we get a very nasty stock market correction or worse, where even the staunchest believers in fairy tales admit that we're in a bear market, I'd be happy to accept your private invitation and will contribute to any such insta that you decide to put up concerning "where's the bottom". Are you prepared to manage that insta for 6 years though? I know that sounds overly dramatic but it isn't meant to be... it's a real possibility.
I don't pretend to know where we're headed, but I say 6 years because that's a possibility. According to many long wave theorists the global economy is headed into a long duration dark cycle. Elliott Wave theory (which many completely debunk but who may be changing their minds about that a year from now), students of the K-Wave (named after Nicolai Kondratiev), and Michael Clark (frequent and well known SA contributor) with his Day and Night Cycle research are all predicting the same thing.
Here's a link to Michael Clark who's work goes largely ignored. This guy is a most admirable contributor to SA but his message is one that people don't want to hear. They'd better start listening...
So we're going to find out how powerful the FED and it's owners, the global bankster cabal, really is. God forbid they offer the solution of a "one world currency" which translates to "New World Order", which translates to "the entire globe is now enslaved to us, we have achieved the first step". In order to offer that solution though, first they have to create the crisis. I believe that's what we're looking at here.
Glad I asked what's next. I knew I'd get some good responses here. I wish I could add more to the conversation, but one thing I've learned about myself is that I'm HORRIBLE at timing the market. If I was only a bit more horrible (occasionally I get it right) I could be a fantastic contrary indicator!
Regardless of where we end up or how we get there, the charts will show us the way. They provided plenty of warning in late 2007 and early 2008 before things got really ugly, and they nailed the March 2009 low. The trick is to not become psychologically invested in a given forecast and stay focused on an objective interpretation of market behavior. Secular bear markets are notoriously volatile, so you have to stay nimble to successfully navigate these violent cyclical oscillations.
AR - Thanks for the tip on Michael Clark, however he was already on my list of people I want to invite. I have been following him and listening to his theories for some time. I know enough to realize that just because I don't like what someone is saying is no reason to not listen. At first I didn't want to believe Michael, but the more I listened the more it started to make sense. And, as a person, I like the guy. He's a very interesting person on many levels, IMO.
I also intend to invite Eric McCurdy, John L. and a few others whose TA and observations I value. If we get to that point, I'll be prepared to keep the thread alive for as long as it takes. I agree that we could be in the dumpster for several years, but I also expect several more nice rallies along the way. One only need look back to the 1930s to see how that could all play out.
My apologies Mark, that comment wasn't intended to have been directed to you but to the wider audience. I was aware that you know of Michael Clark. Sorry 'bout that. Personally, I like the guy as well. We've had a couple of very nice exchanges about the longer cycles and just happen to see things from nearly the identical perspective.
Oh man... you have that so right, that if the market is going to fall for a period of a few years there will indeed be spectacular rallies. As a rule of thumb, the most spectacular rallies are upward corrections within a bear market. The great thing is that it shouldn't be all that difficult using momentum indicators and market internals indicators to identify when they're about to happen. We're at a very, very important point in the life of the stock markets. We're going to know soon.
I'm very pleased that you're going to invite Erik McCurdy because I like the clarity with which he writes and I like his open minded attitude which is probably less biased than my own. I'd think it likely that other TA folks would eventually chime in as well.
The HO is getting very close to issuing a signal. We have 63 new 52 week highs and 53 new 52 week lows. We need to see at least 75 of each. It could happen today but doesn't have to. If it doesn't signal today, we start fresh tomorrow with both the new highs and new lows being re-set to zero.
Keep in mind that there's no real panic attached with a signal. If we get a signal it doesn't mean "the stock market's going to crash within two hours" or anything that instantaneous. There have been cases where there were 6 signals in 3 weeks (just an example I pulled outta the air) and nothing really too big happened. But the HO has never missed a major crash in the past 30 years so if we get a signal we'd better realize that this could be the big kahuna. Also, in order to make it valid, we'd need to see a second signal within 36 days. It's up to you if you want to wait for it, but it's pretty obvious this is serious.
So stay tuned. Dang, I haven't slept since Tues. morning and I have to go out tonight. I'm trying to fit a snooze in here somewhere. But I'll post here again today (or tonight) regardless.
If the bottom falls out we'll certainly get the 75 new lows required. I guess the question is whether or not we're going to get the 75 new highs. That number is currently at 70.
70 and 57 71 and 60 now 72 and 60 now 73 highs and 61 lows now
My friend Bill Kurtz, a candlesticks guru, runs an excellent advisory service at www.candelaabra.com/// . He has just issued a bearish mid-day advisory based of the formation of an 8-day candlestick pattern he calls a "Sendai Racer." I tried a link to his chart it did not go through - the advisory was for subscribers only.
Bill says the Sendai Racer is a particularly bearish pattern.
Yes, the candlestick formation since the rising wedge peaked at the beginning of the month is definitely bearish. You have six sessions of hesitation (including three hanging man candlesticks) followed by a massive engulfing candlestick that is about to retrace about 13 prior sessions. A major (and extremely reliable) reversal pattern.
You have cited the last seven days of the eight day pattern. Eight days ago there was a large white candle (up day) which book ended the six indecisive days followed by the other book end (large black candle) today.
He's a friend of yours? How ironic... he and I have exchanged emails where he thinks I'm a radical anti-banking cabal rebel.... he says I'm his kind of guy. So we had a heck of a lot of fun exchanging emails for a week or two... and then nothing since.
Right, according to my analysis that first strong up session isn't a required part of the formation in order for it to qualify as a highly reliable reversal pattern. The important part is the hesitation coupled with the massive engulfing session, especially in the context of a rising wedge. All of us candlestick guys have our own ways of looking at things. :)
Thanks for keeping us all posted. It really does look ominous. I think that now would be a good time to take off...no, let me rephrase that...to sell my hedge positions (hedging against my shorts). I don't think I'll be needing the protection from the upside much longer and I still have a little profit left. I may be wrong but it looks to me as though we are going to fall lower throughout the rest of the day and get some (probably not too much) follow through tomorrow before there is any real bounce. Just my gut opinion, of course.
We have the required 75 new 52 week highs. If the market falls much further we will almost assuredly get the required number of new lows. That number is currently at 61. All other requirements are met.
No, we didn't have 64 lows earlier, but you might have read when I said 54.
No, they don't have to be on a close basis and they are cumulative so they don't drop during the day. The number of new highs is now 77 so a few stocks are getting a little sugar. The odds of hitting the required number of lows will of course rise dramatically if the market falls much further. That number is currently stalled at 61. Stay tuned.
Just popped in to say hi AR. Still interested in the HO and this is pins and needles right now. Your good at getting the blood flowing. Been busy and not able to participate much on SA in the past 3 months but trying to make a bit more effort lately.
Hey guns.... how y'all been? I've missed ya bud. I hope you're well. Geez, I'd love to chat but I just woke up from a 1 hr. snooze and now I gotta run. Not enough time some times. Take care :-)
The Omen did not trigger but you can't come much closer than we did today. We ended up with 89 new highs and 63 new lows. This was the closest shave of the 4 near misses we've had lately.
Back in April we had two near misses a week apart. And last week we had a near miss coupled with today's results. None of them count officially of course.
So tomorrow the numbers are re-set to zero and we start over again. Now... I'm going to get some sleep because I have to do some work between 6 and midnight. 8 hours sleep in 3 nights isn't cutting it and my eyes are nearly crossed.
I believe the HIndenberg works off just the NYSE new 52 week highs, not Nasdaq, etc. (Not entirely sure where you got the numbers from). Its also believed that combining Euronext with the NYSE means that the european stocks should be excluded.
This is AR's deal, however, and I'm sure he knows more than I!
I'm not sure "which" new highs Yahoo is reporting but whichever one it is, it's the wrong one for our purposes. It's not the category we want. For example, Barcharts reports categories of "one month highs", "3 month highs", "6 months highs", "12 month highs" and "Year to Date Highs"... but they don't provide "New 52 Week Highs". Yahoo may be using one of those or some other data set of their own making. I don't care about any of those.
So bretkolman, what we're using here is the "New 52 Week Highs/Lows" on the NYSE. The StockCharts symbols are $NYHGH and $NYLOW. That is not what you're seeing in the data you're referring to.
I also use Pinnacle data - get updates every year or so. I find their data very helpful for historical research.
The Wall Street Journal (and Barrons) and The New York Times used to be reliable sources of 52 week new high and new low numbers segregated by market. I have not been tabulating new highs and new lows for the past few years so I don't know if they are still good sources.
I've always been very happy with Pinnacle. Their data is nice and clean. I used them to perform the back-testing of my Cyclical Trend Score (CTS) when I undertook this research project recently:
As an aside, my CTS has only generated 13 sell signals over the past 70 years, and only one of them hasn't resulted in a major move lower, so the odds are still heavily in favor of a confirmed long-term breakdown sometime over the next month or two. Market behavior through the end of August should tell us a great deal.
Erik if we can't trust the data from one of the largest charting services in the world (if not 'the' largest), then we're hooped and perhaps JL should delete all the HO instas to date, because they would have been based on faulty data. The link below is the data Dr. McHugh and I (as well as every other follower of the HO) have been using and we're not about to switch horses in the middle of the stream. And certainly not on what may turn out to be the eve of the HO's first signal:
Agreed, AR. I'm just a bit of a perfectionist when it comes to research and analysis, and I like to have all of my i's crossed and t's dotted. :) I'm going to contact Pinnacle and see why their daily data disagree with the others.
I use Stock Charts regularly and have never found an error in their data. I have not personally been tracking new high and new low data since about 2001 so I can not comment on that. I think you are on good ground to continue to use them, especially since other HO followers do that.
I found when I was tracking New Highs and New Lows that Yahoo often disagreed with the NYT and WSJ, but those two sources were in agreement.
AR - If listed on the NYSE, are the short ETFs included? The reason I ask is that these are a fairly new phenomenon and would make a big difference in the number of highs during a down market day.
I honestly don't know Mark. That's a good question although I believe $NYHGH is made up of individual stocks only. The number of required new highs and new lows is based on the rule that the required number of new 52 week lows must be "at least 2.2% of the total number of stocks listed on the NYSE". In any event I'm just going to use the same data that the other technical analysts use because if the $NYHGH does indeed include ETFs, there is no other data I'm aware of where they are stripped out. My numbers match the numbers used by the other analysts who monitor the HO. So I think I'll have to go with that.
The number of new 52 week highs is currently 40 The number of new 52 week lows is currently 73
BTW, here's a link to some great reading on the topic of the HO. It comes from Dr. Robert McHugh with whom I've chatted via email. He seems to be considered the "main man" to refer to when talking about the HO... although when I discovered that the HO was broken, he never mentioned that to any of his readers (I am one of those readers) until 6 weeks after I'd mentioned it here.
He may have simply accepted the fact that perhaps we would be seeing a market crash without the HO ever signaling, while my focus was on the fact that many people were relying on the HO too heavily and didn't realize it was broken.
New highs currently at 52 New lows currently at 74
Please keep in mind that no sudden catastrophe or magic happens when the HO triggers. The HO can even signal in a sideways market or in an up market, (providing the MacClellan Oscillator is negative on the day). The official numbers for NYMO aren't released until about 5:00 eastern but they're based on the number of advancers vs. the number of decliners (on the day). Those numbers are available in real time and they are currently negative. So I think it's safe to assume that as long as they remain neg. on the day, then NYMO will be reported as negative on the day as well.
Perhaps this was covered before and I missed it but the WSJ page shows number of NYSE issues at 52 week high = 90 and Lows at 78. I know that stockcharts has been the standard reference but why do you think there's a discrepancy with the WSJ? Also, I thought I read somewhere that the "official" marker for the HO was the WSJ
The HO has issued its first signal according to data (the only data I'm going to use) from StockCharts. The data from the WSJ (which I'm going to ignore because Dr. McHugh ignores it) confirms. I'll be more comfortable with it once I've seen the end of day data on the direction of NYMO which must be negative on the day. That data doesn't come out until 5:00 eastern.
This is what would be referred to as an "Unconfirmed Hindenberg Omen Signal". It's "unconfirmed" because now we need to see a second signal within 36 days. It's possible to get that signal tomorrow or at any time really... or not at all.
Thanks, AR. I imagined a little cabal of bearish hedge funds working together to drive up the prices of any stocks near their 52-week highs during the last hour in order to trigger the signal. :) Given the current environment of extreme volatility, I suspect the odds of getting that second confirmation are quite good.
The daily market internals data was just released and as suspected (because NYAD was negative), the Maclellan oscillator was indeed negative today. So this first signal is official in that "all" criteria were met.
As well, the data provided by the WSJ concurred in that if their data were used instead of StockCharts data, the signal still triggered.
As a matter of interest, no matter which day the HO signals again (if it does) you can expect it to be later rather than early in a trading day. That is because the numbers for highs and lows are reset to zero every day. Therefore it's cumulative and naturally takes a good portion of the day to build the numbers. We would never see a signal early in the day. For example, today's signal came at what... 3.50 p.m. or so?
On a side note and for what it's worth... I have my own set of indicators, many of which I discovered all by my lonesome and some of which are based on market internals. Over the last few days they have been giving signals that a top is in. Today, a couple of them (a little slow to signal because they're based on weekly charts) issued a no bones about it "sell" signal. The indicator based on the NYSE gave me that signal but the same indicator based on the NAS has not yet done so. The last 2 times I got these signals from the NYSE were at the Jan. peak and at the April peak. For what it's worth.
For those who are not comfortable with my analysis, here's the first report from a different source. I expect others to follow. We might even see it in the minor headlines or it may be mentioned on CNBC (although I think the odds of that are approximately a million to zero).
AR - Thanks for keeping us updated up to the minute at the end of the day. I have bookmarked the stock charts page so I can keep track. I intend to add to my short positions over the next few days. I noticed that the Russell 2000 and NASDAQ have been weaker than the other major indexes so I will probably try adding some TWM and QID or maybe I'll get brave and try some triple shorts. But I'll probably wait for the first bounce to go all in. As you say, I'll be watching to load up when we get a rally of about 20-25% of the current move down.
Haha. You didn't think I was gonna let ZH beat us to it did you? We've put in too much work here over the past 10 months to allow that. Readers here knew about this first HO signal before Zero Hedge readers did and that's been my goal (and promise) since day one. And you'll know about the second signal before they will as well... I assure you. :-)
Well... what an incredibly strong GDP number released in Germany. It came in approximately twice as strong as expected, in fact the best performance since the formation of the European Union. The result.... DAX closed down .40%. That in itself is an omen if I ever saw one. Who needs the Hindenberg Omen when we see something as shocking as that?
Today we're going to be examining the new highs and lows as we did yesterday using StockCharts' data, but we're also going to monitor those numbers as reported by the WSJ. In retrospect, back in the day that the HO was designed, StockCharts didn't even exist. On the other hand, considering that they are not "part of Wallstreet" I have a lot more faith in their data, especially in light of their stellar reputation for accuracy. It has become apparent that the WSJ numbers are usually larger (or more liberal) than those of StockCharts. I'll be honest, I don't understand the discrepancy but I tend to trust StockCharts more. I think the reason most other HO followers also use the StockCharts info is that is allows charting of the data whereas the WSJ's data doesn't appear on any charting service. But we're going to consider both sources today just to be safe.
According to WSJ, the required number of new highs was attained at about 11:20. It wasn't until an hour later that StockCharts reported the required 75. In any event, if the market sells off as the day progresses, we're likely to be seeing our second HO signal in two days. We're on the case........
Currently the number of new 52 week lows sits at 33 (37 according to WSJ).
Thanks! Looks like the SHFC (Short Hedge Fund Cabal) waited until the last 15 minutes today before making their move. No HO second confirmation, but the market behavior of the last two days (following the plunge on Wednesday) is certainly bearish: no technical bounce at all, just consolidation. This suggests we are heading lower next week. We'll see...
I totally agree with that assessment Erik. The indicators I really trust, the ones which I spoke of yesterday, deteriorated considerably again today. There's no doubt in my mind where we're headed.
I'd expect any gap up (if it were to occur) would be sold hard and instantly. If the market were to open relatively flat (no chance of that in my opinion) I would expect that if it were to make a relatively calm and structured rally, that the rally would be no more than perhaps 25% of the recent drop from 1129.
The news from Germany was fantastic... the reaction to it was absolutely shocking. This can not bode well.
Erik - I have been watching the charts today, also. We are well over the limit on 52-week highs at 127 ,but still at 46 on the lows (creeping up very slowly all day long). Here is the link:
There would have to be quite a sell-off in the last ten minutes for the HO to get confirmed today. We have a long way to go on the lows, but the market is selling off a bit.
Well as you all know by now, today produced another near miss. This one is very reminiscent of the two near misses back in April. Had the market decided to fall in the last hour this afternoon, the issuance of the second signal was virtually assured.
Now on Monday, if the market were to fall at the start giving the required number of lows, then rallies but not quite enough to produce the required number of new highs, we would have another near miss. This is exactly what occurred in April. What causes this phenomenon is not the market volatility but the fact that there are "so many" stocks near their 52 week lows and "so many" stocks near their 52 week highs... at the same time.
You may have the impression that it's the same 75 stocks each day that are making the new lows or highs. It isn't. Whichever stocks participate in the records on any particular day are but a sampling from a larger group. In other words, the market is very fractured and polarized. That's what the HO is really sensing, very weak market internals.
In any event, we obviously didn't get the second signal today. We'll stay on top of it next week.
"In other words, the market is very fractured and polarized. That's what the HO is really sensing, very weak market internals."
Precisely why a whole bunch of near misses are almost as good an indicator as a confirmed signal or two. This market has no meaningful underlying sponsorship. After you study charts every day for years and years, you develop an intuitive sense of market health, and this market feels sick (at least, to me).
You got it! That's the point I was trying to make in reporting near misses... it's that very underlying lack of "underlying sponsorship" which is alarming. Excellent choice of words there Erik. According to Tyler D., the algos are focusing on fewer and few stocks. In his words, "they're running out of targets". That's partially what is causing the polarization, no doubt about it.
As far as that intuitive sense is concerned, yours is much more finely tuned than mine because I've been thinking the market has been feeling sick since October when the volume metrics betrayed the total insincerity of the rallies ever since.
The cyclical advance actually started feeling "sickly" to me in March and April during the course of that speculative blow-off move (I talk about each phase of the topping formation in the following article):
By the time we ran into that blatant distribution pattern during the second half of April, the market action was essentially screaming that a sharp decline was imminent. It all went downhill from there.
As far as subsequent objectives go, I believe our next test will be in the 1,060 area. If we take out that congestion support level, the odds of a break to new long-term lows (and the consequent confirmation of a new cyclical downtrend from April) will jump to about 80% according to my computer model. We'll see...
Whadaya mean one? Truth be known though bud, in the past I'd let drinking alkyhol get out of hand. So a few years back I decided that I'd celebrate St. Patrick's day in a whole new way... I "wouldn't" drink on that day for the first time since I was about 4. It's a special day for those of us who are of Irish heritage and a doubly special day for me since we buried my mother (Kathy Murphy... can't get much more Irish than "Murphy") on that day as well. Lo and behold, I just haven't had the urge ever since, which in all honesty is a total shock to me. But I reserved the right that on the day I christen my yacht I'd drinkin' that champagne, to hell with bustin' it over the bow.
Have a great weekend yourself. It's nice to hear your voice.
AR thanks very much for the fantastic energy and effort you are putting into this. I have actually followed the HO for quite a period of time now. I exit stocks on a confirmation and re-enter a month after another well known indicator tells us a new bull run is beginning. No rocket science and even though I only back index linked stocks, make about 1 or two trades a year, and have spent more time in cash than stocks, over a long time I am now out performing the indicies by a factor of 250%.
A couple of important suggestions I would like to make. Firstly we should not be too concentrated on the 75 figure. This is not in fact a requirement of the HO. The measure of confusion is 2.2% of issues traded. Today the number of issues was 3107 so 2.2% is 68 or 69 depending whether you round up or down. That means three days ago was a very near miss in deed. Given the very unusual history of the market for the past 1 to 2 years a near miss will probably prove to be relevant because as the HO has found it almost impossible to function (I think you used the term broken).
A second suggestion is data source. I know your main source is more accurate but the model was built on the WSJ. As someone trained in economics and history I believe it is always best to replicate or use the original sources. Sure the WSJ may be consistently higher or whatever, but that bias was built into deriving the HO. The 2.2% figure and other rules no doubt come from use of historical data fit. A 2.1% on a day means no HO under the rules but I bet it still means an elevated risk of a decline is coming.
Once more thanks very much you are doing a much appreciated job. And I new you had to be Irish!
You're welcome WR. It's heartening to know that there are more people reading my efforts here than I'm aware of. Thank you for that.
Thanks also for your message. I hear ya' loud and clear. As I've detailed elsewhere in these instas, I'm aware that the required number is not actually 75, but 2.2% of the issues traded. But admittedly, yes I did focus on the number 75 when in fact you are correct. In fact, I can see that the WSJ data I used today also sports the "issues traded" numbers... an added benefit which I hadn't noticed until now. However it shows 3150 rather than the number you quoted of 3107. I suspect that's due to some after hours updates or something.
"A 2.1% on a day means no HO under the rules but I bet it still means an elevated risk of a decline is coming."
Of that, there is no doubt because what we're really trying to identify here is a fractured market... and a figure that represents 2.1% does that just as well as 2.2% does.
Thanks Mr. Maya. You know, when all is said and done, I think there's a little too much emphasis put on the Omen insofar that it's rules are so strict and that a second occurrence must occur within 36 days. I say that in all respect to it's creator Jim Meikka. And in respect for him I have also maintained the accuracy as closely as I could. Having said that, I shouldn't focus on the number of 75 so closely although that number has historically pretty much represented the required 2.2% of issues traded on the NYSE. I should focus on the actual 2.2%, having to trust the figures from the WSJ's live quotes as being accurate.
In any event, what we're really measuring here is the fact that internally the markets are 'secretly' becoming fractured or polarized. That's really what Jim Miekka was after when he designed this gem. As Wave Rider astutely pointed out in a comment above, "a 2.1% on a day means no HO (signal) under the rules but I bet it still means an elevated risk of a decline is coming." He's absolutely right.
I personally think it's a mistake for investors to confidently go about their trading from the long side in anticipation that the Omen might not signal again. They're right... it might not, yet the markets could crash nonetheless. And when the man himself, Jim Meikka, last week said he'll be "dancing close to the door", you can bet he's not holding long positions either. There are those who still hang their hat on the truth that the triggering of a signal by the HO also does not necessarily portend a market crash. That's true enough, but never before have we seen a world so awash in cash, yet not enough cash to thwart a coming credit collapse.
In this era, where even the Dubai crisis is not yet solved, let alone the Greek situation or the ones yet to emerge (the PIIGS are only the tip of the iceberg), I have little doubt that the the HO is dead serious this time. To top it off, Michael Clark's study of what he calls Day Cycles and Night Cycles, Elliott Wave theory, and the Kondratiev wave all point to the same thing... some sort of collapse is coming. Maybe not next week or next month, but when the HO also flashes an alert, man we'd better pay attention.
It's late and I gotta get to bed, been workin on this for a few days: Hi guys, been reading this blog for several days. Can't believe I never heard of the HO b4. Sounded interesting, so I took a look back to 1985 and forward, armed with 1st occurrence dates and time til bottom, etc. At first I was a little confused, cause first occurrences often came near bottoms. After several attempts to make some sense, I started over and looked at it in terms of elliott wave theory. What I found was very interesting. The 3rd wave of the great bull mkt began in august 1982, and until 2000 was a roaring bull . Most of the wave count in that extended 3rd wave is difficult at best, but all the different segments divide quite nicely into waves of 5, and many of the sideways corrections can be considered 4th waves, as is usual. What I found was that during the bull mkt, most HO 1st occurrences came in 4th wave corrections, often near the end of the A wave, then a B wave rise, then the C wave then the 5 wave, then a bigger sell off. Often, since 4th waves are sideways their wasn't much of a down move. 87 was one of the best of course. Prechter lists the bottom of 87 as the 4th wave of the 74-2000 bull (never been convinced of that, it makes the move since 87 an extended 5th wave, instead of 3rd as I mentioned, but it really doesn't matter). So 87 was a 4th wave ABC correction with an unusually deep C wave. AND the first occurrence that year was sept 14, near the bottom of the A wave, then the B wave, then the huge C wave in October. 1st signals came several times after 5th of 3rd wave corrections, some times near the end of the correction, once at the beginning, right at the 3rd wave top. In july 98 the 1st occurrence was after a 5th wave straight line spike. The first down day was a huge engulfing candle, with a good down move that followed. For the most part, though, the Omen seemed a disappointment. The straight up bull had few deep corrections other than 87, and then in the late 90's. And the signals came in 4th waves, so the best moves were often several months out after a 5 wave had been put in. Then we get to the bear mkt that started in 2000. 1-24-2000 we had a signal, again this was near the bottom of A of an ABC correction,the final 4th wave of the great bull, a 5 was put in and the bear started (looking at SPX). The next 1st occurrence was July 26, 2000, near the end of the first corrective rally, which lasted another 6 weeks. Sept 1 was the high of that rally, wave 2 up. On sept 15, a first occurrence again, now we are early in a wave 3 down, the longest and quickest area of movement in a bear or bull mkt. It lasted til April, 2001. ( I am labeling the bear of 2000-2003 as a simple deep zig-zag). To finish up, a list of 1st occurances and where they were relative to wave count: 6-20 2001, early in the following 5th wave down, nice move again. 6-20, 2002, after a big ABC correction, and resumption of the down trend, this one is late, in the middle of the 3rd wave of C, but with lots of downside to come. The next several come during the rally from 2003 to 2007, and occur in similar places as the prior bull mkt, near the end of 4th waves and sideways corrections, with sparse down moves. In june 07, again right near the bottom of 4th of a 3rd wave, about 5 weeks before the top of 3. Nice move down into the final 4th of august 16. Then the final 5th tops Oct 11th. On Oct. 16 another 1st occurrence takes place, just days into the down move. And then June 6, 2008, right at the start of the 3rd wave down!! So to sum it up, during bear markets, HO 1st occurrences seem to come either at the beginning of the bear, or at the beginning to middle of the important 3rd waves down. The dates I have used are what I found on the web in different places when searching for HO. I don't know if there are others I missed. From what Albertarocks says there were some close calls in april 2010, just before wave 2 up ended, and now here, just as we may be beginning a 3rd of a 3rd down. Of course the mirror image could also be possible, and we are near the end of a 4th wave and one more high above 122 in the spy is in the making. Time will tell. I would love to know dates going back further than 85. Hope you find this interesting, and hope I didn't get too long winded.
To bed too late and up too early, gonna be a nap in the near term. Just wanted to finish some thoughts. When you check the NYSE new high list for aug 12, what you see are not ordinary stocks, but exchange traded bond funds, muni funds, etc. Only 7 looked like stock symbols. 2 -- I could not get a Yahoo quote on, 2 were new issues, 2 were small unknowns, and one was Tim Hortons. I think what you see, at least in recent years, on an HO 1st occurrence, is the flight to safety driving up bond type issues to new highs. It would be interesting to go back and look at all occurrence dates and see if the same types of issues are the ones making the new highs. Were these types of issues prevalent on the NYSE in the 80's or further back? Another point is the occurrence in 4th waves is very logical. After a sustained 3rd wave rally, investors know intuitively things are over bought, and need a correction, and maybe this is the big one. The latter stages of the flat , time consuming sideways trend might shake out some, as they seem whipsawed. The thing I found odd was that after the 4th was put in, and the fifth, several months down the road the bigger sell off started and no HO during that longer and deeper slide. As the bull wore on in years investors were sooner to hit the exits after tops. (you see this reflected in charts, as the tops get closer and closer together, until the final top is in, that is a product of astute crowd behavior, saying I'm back in but ready to bail at moments notice.)The sell off in 98 got the signal just a day or so in, after a steep straight upward 5th wave spike, again intuitively many would feel the mkt over bot. Then during the bear, the signals start coming early in down 3rd waves, which when you think about it, is the same place relative to the last top as a 4th wave, only now no new high, and a trend reversal is in. It all fits so nicely into crowd behavior, and shows that right or wrong investors are ready to jump to safety after extended 3rd wave run-ups. Now I better understand why 4th wave extremes are such technical magnets, they are places where critical decisions are made by investors as markets resume trend, and when it fails to be a correction and trend reverses you get such exaggerated 3rd wave moves as the crowd becomes aware of that reversal and piles in to the new trend. Makes sense to me!!
I believe a new record has been set for the longest 'first post' on record at Seeking Alpha. Most likely a new record has been set for the longest 'second post' as well. lol
You have put in an amazing effort skeptic, based on a lot of research and deep digging. I personally wouldn't go to the trouble of doing that though when it comes to the HO, since we never know with certainty until well after the fact, which wave we're in. But I certainly appreciate the effort you've put in here. Thanks for the very interesting information. You've also thrown in a myriad of questions and observations that beg questions. But keep in mind that of all the readers here who I know, none of them study Elliott Wave theory to any great extent (if at all). So I suspect that many of them won't be able to relate to most of what you've written. But I do study EWT so I can relate.
"What I found was that during the bull mkt, most HO 1st occurrences came in 4th wave corrections, often near the end of the A wave, then a B wave rise, then the C wave then the 5 wave, then a bigger sell off."
It makes sense that those occurrences are to be expected in a 4th wave (as well as in other structures such as in a wave 2, particularly if it's an ending diagonal) since, as I've mentioned here before, when the market is making wild swings in both directions, the atmosphere becomes ripe for a HO signal to trigger. That is usually what happens in a wild, sideways type of a wave 4 in an upward trend (wild swings). However, I personally don't try to equate what type of wave was occurring at the time a HO signal was issued because in reality, we don't even know with certainty which wave we're in right now. I have to throw Elliott Wave out the window when it comes to the HO. For example, right now most waver theorists believe we've just embarked on the beginning of a mighty and powerful wave 3 of wave 1. But most of them admit that until proven otherwise we could possibly be in the 'x' leg of a much larger 'abc' ('a' up, 'b' down, and 'c' up), which when completed would have taken the markets back up near the highs at 1220. We really don't know which wave we're in and won't know with certainty unless 1010 is breached. I can't emphasize enough the importance now, of the level of 1010. So consideration of which wave we're in has to be completely discounted.
"I think what you see, at least in recent years, on an HO 1st occurrence, is the flight to safety driving up bond type issues to new highs. It would be interesting to go back and look at all occurrence dates and see if the same types of issues are the ones making the new highs. Were these types of issues prevalent on the NYSE in the 80's or further back?"
There's no question about it, what makes the atmosphere ripe for the triggering of a signal is just that very phenomenon... flight to dividend paying stocks, which in itself is reflective of the "fractured or polarized" nature of a market. When fewer and fewer stocks are participating, that is the very cause of the HO signal. So without researching it, I think we already know that yes, it was the same type of issues (high dividend payers and perhaps bond related issues) that were the ones making the new highs during probably "all" of the previous HO signals.
I go about that particular research a little quicker and a little easier. I've created a chart which shows the ratio between XLP and XLY (consumer staples/consumer discretionary). The result shows that the stocks which are rising are the ones which produce "only what people need" and the stocks which are falling are the ones which provide "what people would like to have but don't need". Needless to say, it's very revealing since it moves in a very tight inverse relationship with the equities markets. Currently, a weekly version of that chart indicates that the ratio is on the rise for the first time since March of '09. This is confirmation of the very phenomenon you're referring to when you speak of the flight to quality aspect.
Thanks tinshins. I subscribe to his newsletter and that's actually an excerpt from the copy I received yesterday. But I really appreciate that you thought of sending that to us. Here's one for you. The brilliant Anthony Robbins has issued his own warning to anyone who cares to listen:
It looks like Tony went from clean cut to grundgy look. I believe the trader he may be referring to is Paul Tudor Jones. However, Tony is not telling many of us what we don't know already. The event that could send us into a tailspin is a currency devaluation. It is becoming quite apparent that the economy has reset to new lower level of activity so tax revenues are not there to support fiscal spending so deficits continue at high level. Are we at the point of no return?
Art Cashin said the signal issued by the HO was the sign of a "confused market". As much as I like Art, I think he's confused on that one. The HO signals a fractured market with a number of stocks showing weakness and a number of stocks showing strength. That is typical "de-risking" as money flows into fewer and fewer issues that are considered "safe". It shows lack of confidence at the very least. I don't think there's anything confusing about that.
AR (and John and all that contribute to this), thank you.
Your constant pulse taking is most helpful and though I can't bestow riches or fame on you guys, I for one, appreciate it greatly.
The disconnect in this country, the markets, the world, never ceases to astound me and I genuinely love the fact that there are people left that actually delve into the cake instead of taking the icing as reality.
Wish I had more to add, but since I don't, I can only add my thanks.
You're welcome Teresa. It's the disconnect, the sheer non-reality of it all that made me volunteer to do this work... for the benefit of the few like yourself who can see the situation for what it really is. You have as good an overall understanding of the 'wrongness' of it all as anybody else I know on Seeking Alpha.
The numbers are building quickly this morning. This is a surprise to me, and of course this is happening right after I'd suggested that a HO signal would likely occur late in a trading day.
According to the figures from StockCharts, the second HO signal is likely today. BUT according to those of WSJ, another critically important rule is currently preventing a signal. That rule states:
"The number of new 52 week highs can not be greater than twice the number of new 52 week lows. THIS IS AN ABSOLUTE MUST"
So far, according to the stats from WSJ (which we'd probably be best to respect and use) that is the case. So at first glance, the signal appears that it's likely to trip.... but we're going to have to hang on until we can confirm the relationship between those two numbers... ie. 'will the number of 52 week highs exceed the double of the new 52 week lows?'.
Interestingly, if we used the numbers as provided by StockCharts (as I'd hard-headedly insisted on only days ago), we don't have that situation at this time.
The issue that I am wrestling with is the same one raised by skeptic this weekend. As originally conceived, the HO was intended to detect a bifurcated market, and the new highs tally was supposed to reflect bullish sentiment. However, with risk averse securities (e.g. bond ETFs) being added to the mix during recent years, the data has become corrupted to a certain extent. When a bond ETF makes a new high, you could make the argument that it should be part of the new low tally, and I'm not sure how best to account for that change. Do we parse the list and move the "bearish" new highs into the new lows category, producing alternate counts of both tallies? It seems like that would more accurately reflect the initial intent of the HO.
That makes sense to me too. A new high in a bond issue does indeed equate to the purchaser's abandonment of the stock market in favor of a less risky bond issue. It also reflects his low expectation of inflation. It sure looks to me that a year from now people will have forgotten what the word 'inflation' meant.
On a side note, the rush of money into treasuries is getting real, real serious here. If any of you are familiar with this topic which I'd tried to draw attention to with this chart:
.... you might remember that I'm blaring my horn about the fact that as the stock markets corrected last week, this ratio (the candlestick portion) is dropping even further (stretching the elastic band even further). Today it more or less gapped lower. This is alarming. It means that even though the equiites markets are falling, rates are falling even faster (treasuries are rising even faster than stocks are falling). The treasuries markets are running away from the stock markets and the stock markets, even though they fell heavily last week, can't catch up. Something is going to give and probably violently. Either rates are going to explode upward or equites.... well the pressure is certainly on equities.
Agreed, just look at the 30-year break out today. The 10-year has become incredibly overextended and I'm expecting an overbought correction at some point, although treasuries can certainly move longer than expected when they gain this much momentum.
Yes, it's such a gigantic market and tends to be loyal to its trends for extended periods. I see absolutely nothing in the chart of $UST that suggests any slowing of its upward momentum. From where I sit it's simply saying that a whole lot of money doesn't like the risk aspect of equities. I hate to sound bearish all the time... hell I'd love to participate in an honest bull market. But it is what it is. Equities are likely headed a lot lower.
I have a request in to StockCharts for an explanation about why their numbers (highs and lows) vary from those of WSJ. Hopefully StockCharts has stripped out ETFs or are doing something in order to make their numbers more pure. They're sticklers for accuracy.
In the meantime, the only thing preventing a second signal at the moment according to the WSJ numbers is that the number of new 52 week highs is more than double that of the lows. If the equities fell from here the number of new lows would rise, in which case a signal is more likely.
According to StockCharts, that is not an issue and if the markets were to fall from here (today) a signal would most likely be issued today. In fact, the market wouldn't even have to drop... the number of new 52 week lows according to StockCharts is currently at 63. A dozen more and we have another signal according to StockCharts' data.... providing NYMO is also negative on the day. At the moment I'm not sure where it is since $NYAD is higher (suggesting $NYMO is rising), but we won't know whether $NYMO is negative until after the close. If $NYAD were falling, we'd know for sure that $NYMO is also negative because it was negative at the end of last week. We may have to wait this one out until some numbers are released after the close.
We have one issue of confusion out of the way. Cole Johnson at StockCharts just told me that when in doubt, use the WSJ data. I was wrong to have trusted StockCharts data as much as I have been, and we can all thank Erik for challenging me on that. Great job Erik. My apologies friends, I'm only human. I like the team effort that's evolving around here that's fer shure. :-)
We're all in this together, AR, and you're the one doing the heavy lifting around here. I'm just glad we were able to get the data question nailed down.
AR, could you post the two tallies (Stockcharts.com and WSJ) for 8/12 (the day of the first confirmed signal)? I wanted to see if either of them match the data I have from Pinnacle:
New highs: 106 New lows: 81
I also have an incredibly close near miss for 8/11 from Pinnacle:
New highs: 105 New lows:67 (needed 68 to be official)
I have to zoom in on the charts and just make a determination:
StockCharts shows lows on Aug. 12 at 75 and highs at 84. As I recall it was a squeaker and that the signal came at 3:50 eastern. However I was referring to StockCharts data at the time. I don't really like this method of answering your question Erik but it's only method I have. I didn't write the numbers down anywhere and scrolling up, I see that I didn't post the final numbers on Aug. 12th either, concluding that that was more or less a moot point.
I don't have access to the data records for WSJ nor any charts, so I have no way of knowing that one.
This is something you possibly didn't want to hear. With the vicious drop in the NYSE last week, the 10 week MA is rather suddenly threatening to turn lower once again. At the end of trading today, that MA is only microscopically pointing higher than at the close on Friday. Explanation is on the chart here:
Aug 11 105 highs and 67 lows Aug 12 92 highs and 81 lows.
I found the point about changing composition of listings interesting and I am sure it will have had an impact over time. I also have been wondering to what degree the infamaous fat finger trade trade may be distorting the number of lows. ie there may have been a few lows put in that day that will not be breached today or tomorrow but todays or tomorrows figure would have been a year low otherwise.
Also liked the analysis of the HO agianst elliot wave although I know little about the latter. To me an important way forward from here if there is a confirmation would be to get a better idea why the HO is a better predictor in some instances rather than others. In broad terms a third of the time it is correct in anticipating a significant drop, a third of the time a medium drop, and a third of the time one that does not matter much in the long run scheme of things.
Once again thanks for the work AR. I am also a fan of your work Erik.
"To me an important way forward from here if there is a confirmation would be to get a better idea why the HO is a better predictor in some instances rather than others."
You mean let's see if we can tweak it into the holy grail. lol
I'm so worn out right now that the only thing I really feel like doing is moving to Salt Spring Island to start smoking pot and become a soapstone carver. Salt Spring is inhabited by most of Canada's most famous artists and other genuinely weird and wonderful people. It's one of the best kept secrets in the world so if I disappear don't tell anyone where to find me, ok:
I already live on an island AR. Tasmania. Thats right your comments have reached right round the world. I have been to Canada a few times and can only describe tasmania as a acaled up version of Prince edward island but with some of the wilderness of the west coast as well.
FYI.....Here is a link to the refined HO as stated by Miekka to Greg Morris. According to the refined version the HO signal was not activated. You would think by now that the HO requirements would be stable but it seems that the old requirements seem to be the only ones that are consistently desemminated. This information is courtesy of Tom McClellan.
Here is a link to the highs and lows for WSJ. Read through the list of new highs, you won't see many that you recognize as a stock. I'm quite sure there are way more of these types of dividend paying securities today than there were 20 yrs ago. I would sure love to see a new high list from HO days in the 80's AND 90"s. I am working up some charts to show 1st occurance days, done thru 1994 so far, and those first 8, out of a total of 24 that I hace a list of ALL occurred in a 4th wave of one degree or another. Unbelievable when you count it all out and stive for accuacy. I'll try to post them. Keep in mind that was during a very strong bull mkt. In the 2000's and forward some of what I saw in bear mkts came early in the resumption of the down trend, start of 3rd waves down. Gonna work those up for my own use, but will gladly post them if you guys wanna see em. link online.wsj.com/mdc/pub...
Here are 3 charts showing HO first events (bright green line with date). Excuse the slopiness, and wierd colors, I made a few mistakes but didnt want to take the time neccessary to fix. Look at the last chart first, double click to enlarge. I think the reason they show up in 4th waves is that is when the volatility picks up and mkt participants start thinking maybe a top of some kind is near. During a bear mkt it changes. The move down the last week or so looks like a complete small degree 5 waves down that finished yesterday, and the HO came right on the day that started the 4th wave of that 5 down. Don't no if that portends anything, but it is keeping with the nature of the HO beast, LOL. s676.photobucket.com/a.../ For a waver, it may be a good confirming tool that a 4th wave is in and the next extreme , the 5th, expect a trend reversal. The problem is that you must be aware of the degree of the 4th, a small 6 or 7 day trend, and a one day 4th, only means we should rally for a day or two, and that is what is happening the last 2 days. On these charts, one occurance was in a very large degree 4th wave, and it took almost a yr to finish the 4th and the fifth!!
AR - I noticed that you mentioned that the 10-week moving average was in jeopardy of turning downward and that such an occurrence could wreck the HO. I suppose then that we needed a few up days like we are having, especially today, to put the HO back in business. I have a question, though. Does the 10-week MA need to be continuously heading up during the 36 day confirmation period (or shorter, depending upon how long it takes for the confirmation to trigger), or can it turn down temporarily during that time frame and then turn back up in time for the confirmation trigger event?
Yes Mark, it would be permissible if the MA flipped lower then back up again during that time window. It's just that while it is pointing lower (however brief that may be) the HO is invalidated.
AR, John Lounsbury: Greetings. It would seem that the HO has made it's debut on tickerspy.com in an article about the ETFs to buy for protection against the HO triggering. Just thought I would give you guys a heads up since you are the prime movers of this blog.
Since my comment last night, a WSJ interview with Miekka has been released. Miekka states that his NH, NL cutoff is currently 2.5% and not 2.2% or 2.8%. Based on the current cutoff of 2.5% the barrier was 80 so the HO indicator was activated on 8/14. He promptly relayed the activation call through his Sudbury newsletter to clients. The interview contains other interesting market thoughts and action plans as well.
The HO, alone, isn't terribly menacing. However, when you couple it with all of the other reliable recession indicators that have already signaled, the argument is compelling:
For example (warning: my own horn is about to be tooted), my Cyclical Trend Score (CTS) has only generated 13 confirmed sell signals over the past 70 years, 12 of which were followed by substantial declines in the S&P 500 index. The CTS signals are rare, but when they do occur they are of high quality. It is the confluence of current indicators and signals, including the HO, that suggests great caution is warranted at this time.
eric, nice article in the link, I have read you before when you get linked to some other site I happen to be on. Always on the look out for superior info like this instead of what one sees on CNBC. Thanx
What better way to scare the stocks off folks so the pros can get'em on the cheap. Market is a "Drama Queen" a la Raum(sp?) Emanuel - "Never let a potential downturn go to waste".
With folks getting only snippets of the full story from Art Cashin, CNBC guests, Cramer, the confusion will add to the fear and make it easier to scare folks out of the positions.
Quite recently Jim Meikka changed the rules for his Hindenberg Omen, partially to refine it in light of the new types of issues being traded on the NYSE and partially to further confuse me.
But the changes make sense and probably refine the HO to be as good of an indicator as it was 25 years ago. I guess you could say he brought it back up to par. The one change that isn't likely to work quite like he's expecting is the fact that from now on we won't be looking at the 10 week MA on the NYSE but at the closing price of 51 days ago. IOW we're basically now looking at a 50 day MA which is pretty much the same thing as looking at the 10 week MA. But if the NYSE begins to meander very near the 50 day MA the HO could switch on an off a little more often than he's expecting, at least until it makes up its mind. In the purest form, what new rule is saying is that the current price of the NYSE must be higher than the price of 50 days ago. So when the market is open, we will be observing the candle of 51 days ago to determine the line in the sand. In the past you may have noticed that in the upper left corner of this chart, I had been occasionally listing various dates in white lettering and the level of the 10 week MA on those dates?
What I was doing was monitoring the level of the 10 week MA on a day to day basis. So when I reported the HO as being broken, I was actually using his new method (because it really is more accurate). Perhaps that's why I seemed to be the only person reporting that the HO was broken (intra-week), maybe I was the only person who knew it was broken intra-week or who bothered to monitor it that closely. Of course once the week had ended, it was easier to see that the 10 week MA had turned lower. Essentially I was one step ahead of Meikka on this one, so I'm glad he changed the rule because now I don't have to do that process any more. I'll simply make a new chart in a daily version, and without further ado... here it is:
Mr. Meikka has also changed the number of new 52 week lows from 2.2% to 2.5%, and now to 2.8%. It makes no difference, as long as we know. If he changes his mind again tomorrow, I hope he'll at least phone me. My number is 403-478-9... jeez, maybe I'd better not finish that.
In any event I think we're back on top of it again. Let's just hope this whole "broken or not broken" issue doesn't even enter the picture anymore.
And finally, the entire issue of the HO has gotten more confusing than it needs to be. In an effort to kind of reduce the noise I think it's probably a good idea if I keep my own comments here to a minimum. Either the HO is going to signal again or it isn't. You don't need to be bothered with all this superfluous stuff, although admittedly I am still trying to let you folks know before anybody else does. Why? I don't really know... it really isn't that important to know immediately because while a second signal would simply confirm an official Hindenberg Omen signal, the stock markets might completely ignore it.
AR: Greetings. I don't find your observations and comments inane at all. In fact I rather enjoy the byplay generated by all of the comments. No one in their right mind takes one data point as the end all or be all of market trends. That being said thanks for keeping us up to date on this one.
You have done an exceptional job of keeping us informed and I, for one, feel like I have had a graduate level course in HO because of your efforts.
It is understandable if you don't keep writing the HO text book for us - after all, you must have a real life as well as your blog life. Briefer posts when there is news will be welcome and I hope you will continue to do that.
I hope I speak for all the participants in this discussion over the past many months when I say your efforts have been much appreciated.
I have to chime in and express my gratitude as well, AR. Your commitment to keeping this thread timely has been commendable. There are obviously many interested readers and I'm sure everyone is most appreciative of your time and effort. I know I am.
AR - Ditto from me on the appreciation side. I actually like the commentary, even when you may get long winded, because it makes the HO more understandable for me. It reminds me of the 3 exams of the CFA program. The first determined if you knew "what" financial analysis was; the second determined if you knew "how" to perform financial analysis; and the third determined if you knew "why" you did everything. Thanks to your observations and those of other comments, we all have a better understanding, not only of what the HO is, but how and why it works. The "why" has always been important to me.
here are the last set of charts, the 1st and 3rd ones include steep down trends. Thnx again to elliott wave international.com, I have to give them credit for what understanding of EWT I have. s676.photobucket.com/a.../ The signals in a down trend definately show up in relation to EW differently than in an uptrend.
Hi skeptic. On your third chart you make reference to a location where you "think" I had said there were two close calls (one week apart). You have that location correct.
No. That's one of the cutest new arguments by the 'pundits' now (who've just recently heard of the HO for the first time). They argue that since everybody knows about the HO now, it will fail to work. I find that to be very revealing of their complete non-understanding of what its signal is exposing.
You know, this whole thing about once a system that works has been discovered it won't work anymore is way premature on the HO. Just because people have heard about it now does not mean it won't work this time. I would suspect that most of those who have heard about it for the first time haven't even acted upon it yet, especially when they listen to the pundits tell them that it is old hat already. If it works this time, having been uncovered by the masses, then I would say that the next time it may not work because everybody is using it. Right now, there are just too many folks out there poo pooing it to think that it is in widespread usage.
Plus, when taken out of context (as has been the case here) neither the HO nor any other single signal (boy those two words are hard to type together) is far less relevant than when considered along with all the other indicators pointing in the same direction.
Yes, it reminds me of the way technical analysis (TA) is often criticized. People who have no true understanding of market behavior will talk about TA and fundamental analysis (FA) as if they are two completely different processes. However, properly applied TA addresses both fundamentals and psychology, as price action is always a reflection of both.
Saying the HO won't work is akin to saying a MACD won't work due to the fact that most people know what it is by now. Or it's like saying the MacLellan Oscillator (one of the components of the HO BTW) won't work or stochastics won't work because they've been discovered by the masses. It's just mathematics, nothing more. It's not much different than saying 3+3 doesn't equal 6 anymore, because everybody knows about it now. It's just math. The HO has already worked. It's warned us once. That's it's job, a job well done.
Whether or not the market will tank is a different issue. If it doesn't fall in a huge downward correction, these experts can say (and they surely will) "see, it's all a bunch of hype, it didn't work". Of course it worked. But the notion that the market will not drop now 'for the reason that people have found out about the HO' is pure nonsense. And it will be just as nonsensical the next time it signals as well, say maybe a year from now (who knows when).
They've been saying that about TA as well for years. However, the techniques that Charles Dow developed in the late 19th century work just as well today as they did then...
Eric, I agree, the last ten days are classic EW, classic normal TA, and classic HO in a downtrend. Not to mention the fundamentals which are all turning lower again, from credit spreads, to M3 and company outlooks, and unemployment. In upwards corrections with sour news, the bulls claim an uptrend must be in place, when in fact a correction is going to run its course, no matter what the short term news is. That is what most people don't realize.
This thought just popped into my head, not sure if I read it somewhere , or actually had an original thought of my own, LOL. Technicals always work, it is only their interpretation that sometimes fails.
1. The HO has generated a flurry of interest in the past when it has triggered. It then fades to the obscurity of spaces occupied by a few like Robert McHugh, Jim Miekka and Albertarocks.
2. TA is an attempt to assess investor psychology. FA is an attempt to assess relative financial situations. The FA adherent who can not remain solvent as long as the market remains irrational could definitely benefit from TA. The TA adherent who buys a high momentum stock just before it craters might have avoided that with some FA.
Now I will concede to Erik that he is correct - FA and TA do have intersections and overlaps.
Yes, TA is a subtle art and there are many ways that its application can go wrong, from simply misunderstanding the process to misreading the price action due to bias (e.g. I have a short position so I want prices to fall). But it's also important to remember that even if you correctly interpret market behavior, it can still move against you. We are only ever dealing with possibilities and their associated probabilities, never certainties. Even when you correctly identify a forecast that is 80% likely to occur, there is still a 20% chance that the market will go the other way. For me, TA is a tool that enables me to have the odds on my side on a regular basis, which is really all you need to achieve long-term success.
John, in response to point two, I would submit that price action is always a reflection of both fundamentals and psychology. Markets are discounting mechanisms that always see into the future, and as William Peter Hamilton (editor of the WSJ in the 1920s and Dow Theorist who called the 1929 crash in advance) once observed: "The market does not trade upon what everybody knows, but upon what those with the best information can foresee."
Granted, there are often times when psychology distorts price action materially, driving markets or individual stocks to absurd highs and lows, but intrinsic value is always in there somewhere. The trick is being able to identify which is at play and to what extent. That trick is incredibly difficult and we all struggle with it, but it is also the challenge that makes market analysis so appealing to me. If it was easy, it probably wouldn't be nearly as much fun (although being a bored billionaire has its appeal as well). :)
Are we not right now in a technically driven "right-right" shoulder, range bound market? How many times have we seen a bounce off a support, or a downward spike off of resistance? Indicators are the algo HFT's bible, right now, and the right-right shoulder indicator is genarally concieved to be quite bearish.
When Doug Kass reportedly saw the "bottom of the year" it was because of RSI. He saw this three days after myself and John L. saw this indicator showing, well screaming, for a significant bounce.
Indicators are what we have right now to coax and influence our investing models, especially the short term ones. My investing model right now is to stay in as much cash as possible. Makes no difference to me if the HO has become mainstream news.
Because before it triggered, it wasn't. That fact alone to me nullifies the idea that, "if everyone knows about an indicator, than the indicator becomes impertinent."
[Makes no difference to me if the HO has become mainstream news. Because before it triggered, it wasn't. That fact alone to me nullifies the idea that, "if everyone knows about an indicator, than the indicator becomes impertinent."]
This formation is certainly related to a head and shoulders pattern, but--in its current for--it is actually even more bearish. A second weekly close below the congestion zone in the 1,060 area would be a major bearish signal predicting a retest of the June low at 1,022. Obviously, a subsequent break well below 1,022 would confirm the start of a new cyclical downtrend from late April and forecast substantial losses, beginning with a quick trip down to 950. All JMO, of course.
Eric: Thanks! The charts you present are keen and astute observations, rife with all kinds of bearish indicators.
In another column, over in OptionGirls Quick Chat "QC", I reviewed a conversation I shared with my Wells Fargo Senior Advisor about a week ago. His advice is much the same, as he expects, as does Wells as an organization, that the markets are in for a rough ride for the next couple of months.
Let me go find it, and haul it in here. Here we go (taken from QC #89):
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Toe in the REE pond today with Molycorp.
Overall, and after a looooong conversation with my broker, I am going to stand pat, and not buy anything in the brokerage account until at the earliest, the middle of the fall season. Not going to be real aggressive with the gamer account either.
Here's a key point, which I believe Triple and others have been making. If the republicans gain control of the House in November, I will be buying the next day. If the blue dog dems somehow maintain control, I will be shorting the market.
Following are some other points discussed, not priortized.
Of course, if Israel decides enough is enough and bombs Iran in September, then I'm plunging into oil stocks. Is there something sneaking around about this I've been oblivious to during my extended trip? (Note: I was in Honduras for two months, Eric)
All the negative thoughts about housing, for me, are beginning to become more market related, than nationally related. I was beginning to see this months ago. Outside of Phoenix, Case Shiller has housing on a rebound in cities like Mesa and Glendale. Saramento is up huge in valuations, and San Francisco has also improved. Of course, there still is Chicago, and other markets, which will continue to slide. Broker said there was an article today on page two of the WSJ (though it could have been The Financial Times?)
So we have some improvements in some areas where KB Homes have been built, and also in areas where Wachovia/Wells has a lot of mortgages underwater. QE2 may add further help in these markets that are apparently rebounding. The big point from all of this is that "sytematic risk" in housing is off the table. What the government should do, according to my very conservative broker, and this is contrary to my innate beliefs, is to increase the expired tax break of $8500 to $15000. Clear the inventory as fast as possible.
Here are some sectors that are doing well over the past couple of quarters:
GM and Ford auto sales skyrocketing in China. Domestically, Ford is NOT trying to meet demand with their popular Escort and Escape models. Sales in those models are on the upswing, and Ford has decided to let the dealers scream for inventory, rather than over produce.
Broker expects oil inventory to build out for the rest of this year, but long term, oil is a must have in any portfolio.
Teachers' pensions are growing logrhythmically, putting a stranglehold on many states. Expect the consolidation of school districts to reduce administration costs to the district's taxpayers. The education bill (in the House right now?) is merely a subsidy that forces states to commit to spending for two years, exacerbating, putting off the pension problems.
All in all, it seems like we're still in a period of volatility, and this will continue for a long, long time. Interest rates are going to remain low for at least three or four years. Inflation is far away. China will continue to gain in dominance. Sooner or later the dollar will wane, but I expect later than sooner.
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As for the technical glitch you experienced, I am not sure what to say, except I categorically thought I had previously written a reply to your reply.
The HO is getting quite close to issuing the second signal. If it happens, it would be considered a "confirming" signal and would therefore make the overall HO warning "official".
All parameters have been met except the number of new 52 week lows which currently stands at 69. The number required at this moment is 83. If the market continues to drop, I can't see how that number won't be reached. In truth, the market could bounce from here and that number could still be hit. Stay tuned.
Interestingly, had we still been using the rules of only a week ago, the HO would have issued its second signal today. But since the percentage of required new 52 week lows has been raised to 2.8% we're not quite there with 74 new lows and 84 required.
Looks like we need a sell into the close. Since about 3:25 or so the popular indices have been headed down, but the NYSE composite has been bouncing up and down.
AR - I may be wrong, but in an article I read within the last week I thought I read that Mr. Meikka had decided upon 2.5% instead of 2.8%. I may have misread it but I seem to remember that he had gone to 2.8% and then decided that 2.5% was more appropriate. I'll see if I can find it.
Please do Mark... if that's the case, the second signal will have been issued because the required number of new 52 week lows would be 75 with that calculation and the day ended with...75.
This article was released on Sunday I believe which states the number required is 2.8%:
AR - I found the reference in a comment above by ticktrend and also in the article with the following link (also provided in the comment from ticktrend above):
The quote he referenced was on page two of the article. The article said that the reporter confirmed with Mr. Miekka, but he was quoted as saying that the change to 2.5% had occurred years ago. The article was published on TheStreet.com site yesterday. It also referenced 2.2% as outdated and 2.8% as being supported by others, but not Mr. Miekka. Having read both articles now I feel that one has to be wrong, misquoting Mr. Miekka. TheStreet.com article stated that Mr. Miekka confirmed that the HO was triggered on August 12.
If the 2.8% was used we would have missed the new lows requirement by 1 and there would have been no trigger. So, if my logic holds and Mr. Miekka confirmed both the 2.5% and the August 12 trigger, we just may be in business.
Has anyone seen this article? It goes into what we were discussing earlier about bond and inverse ETF's being included in the NYSE hi/low count. seekingalpha.com/artic...
Well friends, it's that time of day when I have to leave until midnight. Let's leave it like this:
If the rule is 2.5%, then we have the second signal. If the rule is 2.8%, then we do not.
Either way, I hope it gets clarified because as of next Wednesday the HO is going to be broken once again unless the NYSE takes back all of today's losses plus some by then. If Mark or Erik or anybody else can locate conclusive evidence we'll have to go with it. It either did or it didn't... whatever this rule is, will decide. Sorry I have to run, but as John points out, I do have another life.
Had a close read of the relevant Street.com article and it does imply that Jim Miekka's view of the 2.5% trigger is his current view:
"There was some argument over the exact set of conditions required for the ominous stock market crash trigger, but Jim Miekka, the creator of the Hindenburg Omen, confirmed to TheStreet that the Hindenburg trigger occurred last Thursday."
Then:
"While the Wikipedia entry on the Hindenburg Omen claims that the trigger is 2.2% of the NYSE total and others claim that 2.8% is the appropriate trigger, Miekka said that percentage was adjusted years ago to 2.5% to take into account the market move to decimalization."
If we are this close to a signal and have to modify the math to get a no signal what is that saying? How often should the math changes be allowed and still create a reliable signal?
Seems like we should use the original signals since they are in percents. 2.2% is the same no matter how many stocks are listed.
I was tracking the NHs and NLs with the old stockcharts site that AR pointed us to earlier and it had 69 NLs at the close (or the last I checked, anyway).
Question: Is it how many issues traded on a particular day or how many issue are listed to trade on that day? I may seem a little nit picky here, but AR is getting used to me by now? (I hope)
It's how many issues traded that day "and changed value". IOW, unchanged issues are subtracted from the total number of issues traded that day. I was doing that calculation throughout the day, so I knew the number required even as it fluctuated slightly.
But here's a kicker. Just now at about 12:20 a.m. I recalculated and the numbers reported by WSJ have changed considerably, so that 76.75 new lows are required. Would that mean 76 or 77? Which is it? Now the WSJ also shows only 69 new lows as having occurred, while at the close of the session it had just ticked over to 75. Who the hell knows what they're doing over there?
It makes one wonder if they are getting orders from on high to keep the confirmation trigger from happening just to keep the market from falling on fear. I know that is conspiratorial, but it doesn't have to be done in concert with anyone outside the company. If the management believes it is in the best interests of the company to fudge a little to keep things going, they have the power to do so and I'm sure they could think of some justification for it. It's the argument I've read elsewhere on SA that there doesn't need to be any conspiracy if enough significant entities all have similar interests and simply follow independent paths or actions that support a related premise. They all end up supporting the same outcome for their own selfish reasons without ever talking to one another. It may be far fetched to think that of the WSJ, but when I look at the deterioration of quality in their editing from when I was in college, it makes me wonder to what extreme they are willing to go for that extra buck of profit. I had a college professor who handed out copies of the WSJ to each of his class (a different day for each student) and challenged us to find even one misspelled word or grammatical error. We couldn't. Today, I can find one in almost every article. All in the pursuit of profits. How far will they go?
You're not alone in those thoughts Mark. But we'd better be careful or some wackos might be accusing us and any other believers in the Hindenburg Omen's signal as conspiracy theorists who also believe the Queen of England is a lizard, such as this "expert commenter", Sarah McBride:
I don't know what to think. Straight up... the WSJ changed their numbers from what they were at the close of the day. There's no way we can know if the HO issues a signal from here onward if the WSJ is going to jerk us around like that. But I think overall, the fact that so many near misses are occurring and each time that happens the market sells off hard within a week or so should be evidence enough that the market is fractured. As I mentioned months ago, I personally don't wait for the HO because I have plenty of other tools that guide me about when to go short or long. I went short for example in late April before the HO signaled. I was early but so what, at least I was short during the flash crash.
We'll see what happens tomorrow. Rumors have it tomorrow is opex. Usually they monkey around with the market pinning it wherever they need to in order to suck the most blood out of the put holders. I don't know where 'max pain' levels are tomorrow, nor do I care. I'm just sick and tired of the manipulation, period. I mean, for the equities markets and treasuries markets to be rising at the same time, in tandem, at a time when the economy is performing horribly.... that's just beyond belief, completely illogical. Bonds should be rising (as they are) and equities should be at least 30% lower... according to some pretty well known and respected people. And I'm not talking about Bozo the Cramer.
what's the difference, 1 short or 1 over. The make up of the stocks trading on the exchanges has changed a lot over the last 30 yrs. I say it's close enough. There are a lot of serious indcators and fundamentals and TA that all point lower, that even a close call on the omen is cinfirmation for the rest. The only thing really left is for the market to confirm and sell off, it either does or it doesn't, place your bets accordingly. There are nearly as many systems, and indicators and ways of drawing trend lines as there are traders, and when all these different styles say the same thing, the market psychology finds the trend. I remember in early 2008, (this is old stuff so I hope they dont mind my mentioning it) EWI put out some charts when the DJI got down around 12000. There were 2 different long term trendlines, seems like one was from the low of 74, or 82, connecting the bottoms, and another from 2002, channeling the bottom line. They were almost the same line, and connected important lows. In 08 they were just a few hundered points apart, and I wondered which one the market would respect the most. Turned out to be both. Once it finally pierced the first it bounced like a pinball stuck between two bumpers for several weeks. One of the most amazing things I had ever seen. Draw any trend line between 2 important parts on a chart and it will act as support or resistance the next time price revisits it, maybe not for long, but almost always.
Since the HFTs make up the majority of trades today and I suspect that their algorithms incorporate a lot of TA (I mean how else would you make mathematical decisions in a program), so if the HFTs read weakness in the markets I would expect them to play the weakness. That should hold true unless there are manual overrides or a bias built into the algorithms that support the upward trend unless all the TA support breaks down. From the way the markets have been acting, my guess would be something along the lines of the latter.
This is off topic from HO, but something I have been watching. A while back I did a study on the DJIA, and most of the stocks lost 50% or more of their value (GM all, and a few more in the 75% area). This was done in a rolling matter, with different sectors bottoming at different times. If all stocks in the dow returned to their lows IN UNISON, the dow will be down 70% or so. Lower, and.... well you get the point. One of the best performing has been MCD, here are some long term charts that I think may well tell a story when it is all said and done. Keep in mind that in EWT, wave 5's usually retrace most, if not all of their move. s676.photobucket.com/a.../
Well, yesterday we had the NHs in the bag early and waited for the NLs to add up near the close. Today it appears that the roles have been reversed as the Lows look like their above the mark and all we need is for the Highs to play catch up.
OTOH, I have to agree with skeptic and AR. The fact that we have been so close so many times probably tells us all that we need to know. I've gone short with about half of my funds and am considering adding to that position now. A confirmation might push me into a stronger commitment assuming that the HO has gotten the attention of enough folks that it may have become actionable if it triggers the second time. Of course, that would mean that I need to get my positions in place ahead of the crowd to reap the most benefit. I guess that's why we're all here!
Did you know that the HO has switched on and off about 5 times already today? As long as the NYSE is below 6783.51 it is invalidated. If it's above... the HO is valid. That's because Mr. Meikka changed the rules to say that the price of the NYSE must be higher than it was 50 days ago. So we look at what the closing price was 51 days ago. That leaves 50 candles (or days) in what would otherwise be a 50 day MA, which is essentially the same thing as what we used to look at... the 10 week MA.
But it looks to me that downward momentum is waning and that the market could bounce here. If that occurs, we will almost certainly get another HO signal today... until the WSJ changes their numbers some time into the evening and messes everything up like they did yesterday.
AR - Thanks for reminding us (me, at least) about the MA. I had forgotten that we were treading on egg shells there. It does look like the market is trying to mount a bit of a rally and we are picking up some new highs, so the possibility still looms large before us.
I have another question (to which I think I know the answer, but...):
If the MA and all other requirements are met on an intra-day measure, including the New Highs and Lows, but the market then swoons in the dying minutes of the session throwing the MA back below its required level, does that count as a trigger?
If the close at the end of the day is higher than the close of 50 days ago and all other requirements are met then yes, it's certainly valid. That you know. But we're not actually considering the MA anymore, but are instead considering his rule that the "NYA must be higher than it was 50 days ago". I haven't read anywhere where he says it must 'close' higher than it 'closed' 50 days ago. Jim Meikka might come out and say "we had a signal intraday" and if he wants to call that valid then I guess it's valid. But I think the rules are based on the closing index value. I could be wrong about that though because in the past the rule said "as long as the 10 week MA is rising". It's actually vague.
BTW Mark, at the moment there have been 3054 issues traded, of which 106 are unchanged. So we subtract 106 issues and end up with 2948 issues that have traded and have changed in some way.
2.5% of that number (2948) is what we need as a minimum... or 74 new highs and lows. That number could (and sometimes does) change throughout the day. And of course, the number of new highs can not exceed double what the lows number is.
AR - Thanks for that clarification. Am I correct in assuming that it does not matter if the lows exceed the number of highs? Sorry for continuing to dig into the minutiae.
No problem Mark. Here's something that just crossed my mind (thanks to your questions). In theory we don't know how many new 52 week highs have been printed until the end of the day. Therefore, we can't know whether or not it is more than double the number of lows... until the end of the day. So logically that dictates that we have to wait until the end of the day for that verification. Therefore, in theory my declaration above might get shot to hell and I'll look like an idiot. But I don't think the odds of that happening today are good at all. lol
NO! THAT'S A NO-NO... the number of new highs must exceed the number of new low.
Kudos to you for digesting my post of 08/17 @ 5:25PM regarding the appropriate threshhold levels for NH-NL in the HO. I'm sure if others would have taken note of the info provided, the group could have avoided the subsequent wringing of hands and scratching of heads over the correct percentage threshhold to use.
With due respect, I have to take issue with AR's answer to your query regarding the number of NLs allowed relative to the NH levels . In truth, according to Meikka there is no limitation on the number of NLs. They can be less than, equal to or much greater than the level of NHs. The only pertinent restriction is that NHs can be no greater than two times the number of NLs.
As to the form of MA, I have found no difference whether one uses the ten week or 50 day rules. Meikka continues to use the 10 week MA in his newsletter.
In using the HO tool, one should keep in mind the probabilities associated with the extent of market moves following HO confirmation. 78%.......-5% 44%.......-10% 30%.......-15% 20%.......-20% 0r greater These moves have occurred within 120 days of the initial HO signal and 50% of the moves have happened in the first 41 days Based on one's investment style you can purchase insurance via puts, go to cash, or go short to take advantage of the projected declines depending on your level of confidence in the severity of the decline.
On the plus side,the market has already declined 17% from its peak in April to its low in Jul, the presidential cycle calls for a low in the Oct-Nov period and the yield curve remains in bullish mode. In addition , there is the possibility that the inverse head & shoulders pattern will be fulfilled and break to the upside with an expected move to 1250 on the SPX. I would expect the HO to produce a muted response not to exceed a 5% decline primarily because the HO signal has made a delayed appearance well into the decline rather than its normal pre decline warning. Therefore , I will be buying puts as insurance to protect my long portfolio against the 1 in 5 chance of a further 20% market decline.
It would be interesting to hear what strategies others expect to employ during the next 120 days.
The HO has just issued a perfectly valid signal... unless the WSJ changes their numbers at the end of the day again but I don't see how they're gonna be able to ruin this one. Is this the "real second" signal? I honestly don't know if it's the "second" one or not, but it is very real and valid.
Now... as Mark points out... what if the market tanks towards the end of today? His question is "will the signal be valid" if that brings the close of the NYSE below that of 50 days ago? I'd say yes, it's valid anyway. But I'm not Jim Meikka. In any event the market won't likely tank from here (today). Many pos. divergences suggested a bounce of some sort is due. In fact I must be nuts because I went long banks at the low today. I'm already scared sheepless about that. lol
Want to hear something else amazing? On Monday, depending at what level the NYSE closes today, we might open with the HO broken. Haha, somebody git me a beer, I've had enough of this already.
But seriously, it wouldn't be at all uncommon to see many signals in the next couple of weeks, or possibly no more at all. They'd all be a moot point from here on anyway... except that they would just continue to remind us that the market is fractured. I think "weak and polarized" would be a better description of what's being exposed here.
I suspect that the number of highs will be revised downward after the close unless we see further upward movement. I realize that the WSJ is the final word, but yesterday we went through a similar scenario and the WSJ numbers were adjusted in the end to approximate the stockcharts.com numbers. And right now the stockcharts.com numbers would not support the confirmation. New highs are only at 60 there as I write this.
I want this to over with and in the records as much as anybody, but I'm still leery of the intraday WSJ numbers. As a matter of fact, I'm getting kinda leery of numbers in general until the revisions are completed.
Mark, that signal was so textbook perfect that I don't believe they will be making any changes significant enough to invalidate it. So far, an hour after the close, they haven't.
[Zerohedge called a confirmed HO on the old criteria. You know what AR, there's a saying that goes : "If it aint broke, don't fix it" ]
ZH called a confirmed HO on the old criteria and I'm calling it official on the new criteria. But there was a valid reason to fix it tinshins. By the way, since Jim Meikka supposedly changed his criteria before '08, his signal in '08 was based on the same criteria we're using today (the new rules regarding what percentage of new lows and highs are required).
No, the market is not markedly different than it was in '08 from the standpoint of what issues are trading and look what happened after that HO signal. It 'is' different though in that the USA has borrowed a further 14 gazillion dollars since then and have used a lot of that to totally distort the markets. That's bad, bad, bad.
You know what friends? It just dawned on me... my job here is done.
Thanks to all who dropped in from time to time to see what was going on. I realize I got long winded a lot of the time, but when including explanations, that's just a necessity.
Have a great weekend and good luck trading. Get rich and buy me a beer some day, ok!
You've done an amazing job, AR, thanks again! I think it would be a great idea to maintain a general TA conversation about the overall markets somewhere. If anyone is interested, I'd be happy to host that thread on my instablog since most of my posts and articles are about TA anyway.
Thanks Erik. It was a rather longer haul than I'd expected because truthfully I expected an HO signal far earlier than this.
Mark Bern has already suggested that he would set up an insta for that purpose, has invited myself and has said he's going to be inviting you as well as probably Michael Clark and a few others. I don't know if he's "looking forward to it" or what he's thinking exactly. You might want to PM Mark about that.
Hi old buddy. How YOU doin'? (In my best New Yoak immitation)
I couldn't find the ZH article either, but who cares?
I'm glad you followed along guns, but I know you've been on a mission for quite a while now. If you're gonna toast AR tonight and your wife thinks you've lost my mind... just tell her that you've got a good friend in Canada who you're gonna meet someday, God willing.
Happy Anniversary, and cheers right back at ya. Give your wife a squeeze for me.
Thanks for your hard work! I've learned a lot from this thread and, as has been stated by others before, I really enjoy thoughts by those that "see" things as they are not as they want them to be.
On behalf of all the lurkers out there who avidly followed the development of the HO: Thanks AR and everyone else who contributed to the discussion! Thanks to your help, I know I have developed a better understanding than others who have recently discovered it. I'm sure I'll meet some of you in other discussions.
As a statistician and economist perhaps I can weigh in on the discussion of the modification of the HO.
We have had a commonly accepted HO definition for some years based on a 2.2% rule and use of the MA. It seems that has now been modified by the creator, presumedly to get a better data fit which in turn means less signals and more reliability.
The problem is that we don't really know anything about the reliability of this second indicator (I will call it H2O) We do know a lot about HO. If it is confirmed we have about a 1 in three chance of a significant correction. Given the number of ocurrences in the past 25 years this would mean the real probability of a major decline at a high level of statistical reliability is 1/3 plus or minus 1/6.
We don't know anything about H2O but let us assume that it gives a slightly higher historical occurence of a major decline but the evidence was based on less history of triggered occurrences. The problem is that the statistical reliability declines with the reduced number of historic occurences. Hence while it looks a better predictor it may not be at all, it may have refined itself to only giving a random pattern that looks better.
My point is that until someone does the same work on H2O as Dr. McHugh has done on HO I am happy to stick with HO as I know its reliability. On that basis assuming a trigger of 2.185% on Aug 19 is close enough to 2.2% (and hey that is close enough to 2.2% for me) we have in fact had 3 HO sitings and 2 H2O sitings.
Perhaps what needs to happen is that the two series get run by analysts much like VIX keeps two different method series or nations have several series for CPI on changing definitions.
Anyhow, it probably doesn't matter for now but once again thanyou AR for the great work. Even though I have followed HO for years I have learnt a lot more about why and how it works thanks to you and the other contributors.
I live in Perth Western Australia where we have a very strong economy at the moment and very low unemployment due to our ties with China and our mineral wealth. Economist here are bullish toward the future prospects of our companies and I would describe myself as a long term investor, but the problems faced by the US and Europe had been giving me some inner turmoil so I started searching for more information. I followed a link to this blog a few days before the first HO signal and was intrigued. When that first signal triggered that was enough for me to move to the sidelines and begin educating myself on how I can benefit from this situation. Thank you AR, and the "team" I understand that nothing may come of this but all your hard work has pushed me to learn more, and I greatly appreciate every ones efforts.
Thank you so much AR, everyone that added comments, observations, comparisons and questions and, of course, John for hosting it.
I had heard of HO a few years ago (2? 5?), so wasn't coming in totally blind, but I have learned so much about the signal, I am forever grateful, especially for all the work of AR.
This blog has also enlightened me to many other trends/analysis, that I knew nothing about and now at least have a search term to learn more.
Thanks all, at least my appreciation is currently overriding the horror of what the HO could mean. Small victories.
Up early this morn, canning tomato sauce, and of course, looking at charts while it reduces down. From nyse.com. NYA 6813.15 -37.30 (-0.55%)
Index Description The NYSE Composite Index is designed to measure the performance of all common stocks listed on the NYSE, including ADRs, REITs and tracking stocks. In January 2003 the NYSE reintroduced the NYSE Composite Index under a new methodology that is fully transparent and rule-based. Under the new methodology, all closed-end funds, ETFs, limited partnerships and derivatives are excluded from the index. As of year-end 2004, the NYSE Composite consists of over 2,000 U.S. and non-U.S. stocks. It is a measure of the changes in aggregate market value of all NYSE-listed common stocks, adjusted to eliminate the effects of capitalization changes, new listings and delistings. The index is weighted using free-float market capitalization and calculated on both price and total return basis.
As part of my own research I've been studying charts of every confirmed H.O since 1965. Just posted them on my blog, below. Trading the signals is an interesting challenge and not quite as straightforward as you'd hope. Came up with a few ideas though. Best of luck!
tinshins - Thanks for the link - I've bookmarked the page and may just do a copy & paste into one of my docs on my computer in case they take the site or page down. It will be interesting to see if he is even close. I agree, in principal to some portions and with the potential severity, but I'm not sure about the timing. If he hits a few points, though, I'll pay more attention.
Hi Tinshins. Yes, if that pattern is what plays out then I'm pretty sure we'd get another Omen signal at 'that' top, or whichever significant top happens. But at this early stage of the game there are a whole lot of opinions about which path the market will take and to be quite honest, not one of the Elliott wave theorists knows at this time which one it will be. Actually they all admit that as well. Here's another beautifully 'idealized' example of the worst case scenario. A pattern like this one would be 'textbook', so we shouldn't expect it to happen quite like this. lol
I haven't even taken a look at any Hindenburg data ever since we got the second and 'confirming' signal, having the viewpoint that from here on they're more or less a moot point. But a fellow on a different website heard a rumor that there was another confirmed signal today and asked me to check it out. And sure enough, there was. Today's signal and any subsequent signals will serve to further confirm the fractured and polarized and dangerous conditions the market is currently in though.
For those who might still be interested, another HO signal was generated about one minute ago, the second signal in as many days. These signals (4 so far since Aug. 12) are really of no further significance other than to just verify further that the market is very weak, polarized, fractured, manipulated, messed up and in a generally disastrous condition. All the more reason for the FED to prevent a sell-off as should have happened today in light of the worst durable goods report in a decade. I mean, can anybody out there tell me what great news justifies a rally off a 1% lower gap opening? These assholes are incorrigible. JMO mind you. Your opinion may vary (but it shouldn't lol).
AR - I have been pondering the same question all day today. I went out shopping for the last of my son's college supplies in preparation for taking him to the campus for move in tomorrow. First I took a quick look at the data, then I checked the market and saw that it wasn't responding to the data, shrugged my shoulders and went to the store without a worry about a big sell off because, obviously, the PTP team was on the job. If this is not manipulation, I can't guess what else it could be called. Why, even the home builders were up! What else can go up when sales are in the dumpster and the company is bleeding money? No profits, no problem! It reminds me of the 1990s and the dot com era but without any premise for growth expectations.
There's no rhyme nor reason behind today's ramp up. It's just manipulation that can only lead to greater disaster in the future. The bond market knows what the PPT is up to and so does everybody buying those bonds. It seems the morons at the FED aren't aware that while they're playing with these matches, they themselves are doused in gasoline. I don't mind though, I always did enjoy a great big bonfire.
By the way, how ironic it is that the late day rally was what set off the HO signal today. It was that rally that produced enough new 52 week highs to complete the set of requirements.
*if* the retail investor has "left the house" (along with Elvis) *and* institutional and mutual funds have seen *tremendous outflows *and* only the PPT, da boyz, hedgies and HFTs are trading, stealing 1/10 pennies from each other, ... etc., etc.
Can we really attribute the same weight to an indicator developed when none of the above conditions were true?
I *do* believe a fall is coming, but I *do* believe it may or may not hit in the typical time frame following the HO trigger.
I believe it will hit when the PPT, the Fed, the treasury can now longer artificially support the various segments they have been trying to support.
IOW, they've been juggling their, and everyone else's "balls", and they're going to drop them sooner or later as they run out of hands, arms, knees, ... to juggle things on.
The fact that the bonds had to depreciate today, ostensibly in order to drive the market back upward, may lend some credence to this thought, which is based on pure supposition, theory and hyper-imagination by me.
No knowledge was required by me to formulate this blather.
Great questions H.T. I don't know the answer. The volume metrics since last October strongly hinted that it was the algos who were pumping the market. They have the ability to probe and find out how far they can push the market in one millisecond when the asking price is way up there, but there are only 2 shares offered for sale at that high price. So they buy those and voila... the market is up markedly on tiny volume. This can only end very, very badly because there truly is a vacuum beneath the market. There are no buyers other than those who have been responsible for running the market up this high to begin with. Maybe they will *never* sell.
There is just no more logic in the markets. They're very dangerous for bulls and bears alike. Have you ever watched the Asian markets? There is no such thing as an open that isn't a gap of 1% one way or the other. It's been that way for years. I've always thought "god, how difficult it would be to trade a market like that". And now we have one of our own. I just don't know man. I just don't know what the answer is.
Here is the question : Is there any index that measures bullishness in the market ? If so, are we the happy few that knows different ? If not, will we be roasted before them otha bulls get basted ? Ultimately the market NEVER listens to the majority ...
Before I forget, I'm writing this because I'm not a cook. This is from wikipedia ...
"Basting is a cooking technique that usually involves cooking meat with either its own juices or some type of preparation such as a sauce or marinade. The meat is left to cook, then periodically coated with the juice"
tinshins - Good chart. The next week or two could be telling as to which way the break goes. The market held earlier, but will it continue to do so? Only time will tell.
Yeah, if that pattern is proven to be an ending diagonal that breaks out to the upside, it would be very bullish. Totally illogical though, since the market internals have gotten crushed every single day since Aug. 10th. I'd also say that the only way the market could take off on a new bull run, would be if the decision has been made to allow a much quicker death of the dollar than most have anticipated. The entire deflation argument would be dead. But that's just not possible with credit crises and likelihood of defaults still out there everywhere we turn in this world.
I don't think that ultimately the dollar's fate (increasing demand for at least the coming year or two), nor the stock market's fate (toilet tank special) are going to be changed due to anything Ben the Rat says. It's all about the bond markets and interest rates... things Ben does not control. It's all very interesting to say the least, but enormously angering at the same time.
We needed 74 new 52 week lows today. We ended up with 71. All other conditions were met, so it was another 'near miss'. That's as good as a hit because we've now had 4 official HO signals since Aug 12th. We certainly don't need to see any more, but these further 'near misses' and further actual signals only serve to confirm that the market is in big trouble here. No doubt the internals were repaired somewhat today, but we can't see the actual data until 6:00 eastern. But it probably didn't improve much compared to the destruction they've suffered since Aug. 12th.
In any event I'm even more convinced now that the market can't go much higher with the 'ease' they've become accustomed to. Take a look at this chart. It's a thing of beauty if you're short. It shows that the big volume is above us how. If the orcs want to continue to drive the market higher, there's no way they're going to be able to do it on light volume as they have since October. The market has sliced right through that heavy volume price area and I didn't even realize it until today:
I need to edit what I said above. I said: "No doubt the internals were repaired somewhat today, but we can't see the actual data until 6:00 eastern. But it probably didn't improve much compared to the destruction they've suffered since Aug. 12th."
I was wrong. Unbelievably, after today's incredible pump job, the market internals did not improve slightly today as I'd suggested they would, they got destroyed even further. NASI is down. NYSI is down. ALL bullish percentages are down, some of them hard. NYMO bounced a bit producing a slight pos. divergence that will get wiped out on Monday if the market falls on Monday. This rally WAS NOT on improving internals. Even $BPFINA (bullish percentage index for financials) was down almost a full percent. The market internals have been whacked on the head hard every single day since Aug. 12th (the day of the first Omen signal ironically) INCLUDING TODAY. This is no less than stunning. On the other hand, it is absolutely confirming what the HO has been warning us about... that the market is fractured, confused, polarized, emotional.... add your own adjective.
However, the number of stocks above their 50 day EMA did improve on all indexes. The mighty Nasdaq saw it's percentage of stocks above their 50 day EMA rise to a mind boggling 30% from 22%. Now if that's a bull market, then we're in a bull market I guess. All kidding aside, we have to recognize that it was an improvement and all new rallies have to start somewhere. Yet the other internals simply can not be discounted. They're a disaster at the present moment. Of course most can be repaired. But if a rally day like today didn't repair them one iota, I can't imagine what it's going to take.
(CPST): Not actionable, but a Russian news article suggesting that (CPST) might have a JV or fabrication facility there. Would be a long time coming, I would think, and certainly should not be done until CFP is achieved. Even then, the political stability and rule of law there s/b of some concern.
I have those from time to time H.T. They're actually called brain 'pharts'. A glitch refers to a computer issue. At least up here that's how it works. lol
The Hindenberg Omen Blog - August, 2010 254 comments
The comments below were contributed during the month of August. They are a continuation of a discussion led by reader Albertarocks. The preceding blog for July can be read here. For further reference, see the original post.
Disclosure: Long several S&P 500 stocks as well as long and short positions in Nasdaq stocks.
Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.
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This post has 254 comments:
I'm tracking two scenarios at the moment based on a pair of alternative intermediate-term cycle counts. The first possibility is based on the last cycle low having occurred on July 2 and suggests that the current rally will continue until the end of July before potentially rolling over:
www.prometheusmi.com/p...
The second one is more bearish. If the last intermediate-term cycle low actually occurred in early June, then the next reversal can develop as soon as next week:
www.prometheusmi.com/p...
If stocks do head lower starting next week, that would be a huge bearish signal, indicating that a break to new long-term lows is imminent. On the other hand, if stocks continue to consolidate at current levels or even move higher, the rally from early July will likely extend until the end of August, at which point markets will encounter another telling inflection point.
Charts do not always contain an urgent, compelling message, but when they do it is imperative to listen. We have come to one of those critical long-term inflection points and it is time to pay close attention. All JMO, of course!
"The first possibility is based on the last cycle low having occurred on July 2 and suggests that the current rally will continue until the end of *August* before potentially rolling over..."
seekingalpha.com/insta...
We'll need to see how stocks behave after exiting the rising wedge, which has compressed to a relatively narrow range from about 1,110 to 1,132 on the S&P 500.
news.goldseek.com/Cliv...
news.goldseek.com/Gold...
www.newsweek.com/2009/...
If that happens, we could get the first HO signal today. All we'd need to see is the number of new 52 week lows rise from the current 27 to 75. That could happen in a heartbeat if the market decides to tank later today.
www.marketoracle.co.uk...
More technical damage was piled on today, not reduced so I'm looking forward to getting the data after 6:00 that will show how much more damage was done to my most reliable indicators.
Monday could well be 'payback time' for these evil mice because this type of manipulation never ends well. What a potential bull trap. OMG these minions are incorrigible. The treasury markets are really sending a bad signal... take a look at this:
stockcharts.com/h-sc/u...
Have a great weekend.
The last time there was this divergence was April and stocks came down.
The time before that the divergence was resolved with a reversal to higher $TNX as stocks continued higher.
I don't have a knowledge of deeper history so what happens this time is a toss-up. I suspect it will be a repeat of April, but what do I know.
But the path of the sidewalk is pretty much already determined and the bond market is on that sidewalk holding the leash... knowing exactly where it wants to go. The little dog has no choice... it's going where the big powerful bond market dictates. The only caveat to that is that I'm very concerned and suspicious that the FED is buying both markets. It should rightfully be buying neither. In that regard, this ratio might be distorted due to FED intervention. Regardless of who's causing it though, this distortion must correct. The bond markets will ensure that it does. It might be China. It might be the super powerful (and destructive) bond vigilantes. It will be somebody.
I've changed the chart to a weekly basis and expanded the time frame so you can see what's happened since just before the market top in 2007. This broader view shows the severity of what I'm talking about here:
stockcharts.com/h-sc/u...
But it's true enough, in the past we have seen a divergence such as this continue for many months on end. But why it's happening now, when there are record amounts of money leaving equities funds and going into the bond markets is a bit beyond my comprehension. It's just illogical to expect the stock market can continue higher when the bond markets dictate otherwise. Today that ratio is stretched even further than it was back in October '07. That's basically the point I was trying to make by posting that chart. That ratio is at an extreme, like an elastic band stretched very near to its limit. There will be a reaction... either the equities markets will correct sharply to the downside, or interest rates are about to surge. That too would cause stocks to drop in a heartbeat. Stocks can't win this battle.
Today, the trend of $TNX is very clearly down. If it were to reverse, it wouldn't be because the equities markets are leading and the bond markets must obey. It would be because of some fundamental reason for 10 Yr. treasuries to fall (causing $TNX to rise). And I don't believe that's in the cards when the FED seems determined to buy treasuries in light of the fact that the regular customers have gone on strike. It appears to me the FED has a goal in mind and won't likely change it. However, China may well have something to say about that. If QE2 were to be announced officially, I believe we'd see a reaction from China almost instantly... a reaction that would be reflected in the interest rates market as quickly as overnight. I doubt very much that the FED is willing to take that chance. It sure appears to me that they're trapped. In any event it's a very interesting relationship to study. I'm rather tickled that you found it interesting enough to address.
Stay tuned because the Omen came relatively close to flashing a signal today. Had the current rising channel lines been breached, we would have almost certainly got the signal. You may recall that back in late April we had two such "near miss" instances one week apart. Today was the first "near miss" since then. Of course "near misses" don't count but they do show that the current market atmosphere is volatile and conducive to producing a signal .
I hope you're enjoying a great weekend... and thanks for your comment and interest in the topic of this ratio.
stockcharts.com/h-sc/u...
stockcharts.com/h-sc/u...
I don't know what I'm going to do if the HO ever does it's thing thereby rendering these HO instas a moot point. I don't particularly care to set up my own instas in order to try to convince people of the way I think the markets are going to be going. Nobody asked for my opinion and it's not my business to try to convince people of anything. But for John and for the few remaining souls who come here occasionally, I feel quite justified in doing it here. But once the HO is triggered, I may not post again for months and months... or may never. Who knows? I really was that turned off a while back and the general interest and enthusiasm I had back then has never returned.
Thanks again buddy. I wish you the best as always.
Seriously though, how should I time this? Is there a % drop to expect? How long should the drop last? Any indication from previous HO events?
Guy
I'm actually thinking about starting an instablog for technical analysts who are more adroit at reading the charts and other indicators to discuss this very topic. I won't start it until after we see the HO event (assuming that we do) and will invite those whose insights I trust and rely upon. I'll probably call it something like: "Where's the Bottom?" Here's hoping you find it and that it does us all some good.
I don't pretend to know where we're headed, but I say 6 years because that's a possibility. According to many long wave theorists the global economy is headed into a long duration dark cycle. Elliott Wave theory (which many completely debunk but who may be changing their minds about that a year from now), students of the K-Wave (named after Nicolai Kondratiev), and Michael Clark (frequent and well known SA contributor) with his Day and Night Cycle research are all predicting the same thing.
en.wikipedia.org/wiki/...
Here's a link to Michael Clark who's work goes largely ignored. This guy is a most admirable contributor to SA but his message is one that people don't want to hear. They'd better start listening...
seekingalpha.com/user/...
So we're going to find out how powerful the FED and it's owners, the global bankster cabal, really is. God forbid they offer the solution of a "one world currency" which translates to "New World Order", which translates to "the entire globe is now enslaved to us, we have achieved the first step". In order to offer that solution though, first they have to create the crisis. I believe that's what we're looking at here.
I also intend to invite Eric McCurdy, John L. and a few others whose TA and observations I value. If we get to that point, I'll be prepared to keep the thread alive for as long as it takes. I agree that we could be in the dumpster for several years, but I also expect several more nice rallies along the way. One only need look back to the 1930s to see how that could all play out.
Oh man... you have that so right, that if the market is going to fall for a period of a few years there will indeed be spectacular rallies. As a rule of thumb, the most spectacular rallies are upward corrections within a bear market. The great thing is that it shouldn't be all that difficult using momentum indicators and market internals indicators to identify when they're about to happen. We're at a very, very important point in the life of the stock markets. We're going to know soon.
I'm very pleased that you're going to invite Erik McCurdy because I like the clarity with which he writes and I like his open minded attitude which is probably less biased than my own. I'd think it likely that other TA folks would eventually chime in as well.
www.zerohedge.com/arti...
seekingalpha.com/insta...
Let's see how this new downtrend develops.
Keep in mind that there's no real panic attached with a signal. If we get a signal it doesn't mean "the stock market's going to crash within two hours" or anything that instantaneous. There have been cases where there were 6 signals in 3 weeks (just an example I pulled outta the air) and nothing really too big happened. But the HO has never missed a major crash in the past 30 years so if we get a signal we'd better realize that this could be the big kahuna. Also, in order to make it valid, we'd need to see a second signal within 36 days. It's up to you if you want to wait for it, but it's pretty obvious this is serious.
So stay tuned. Dang, I haven't slept since Tues. morning and I have to go out tonight. I'm trying to fit a snooze in here somewhere. But I'll post here again today (or tonight) regardless.
Lows are at 53
Oh Geez... 69 and 54 now
70 and 57
71 and 60 now
72 and 60 now
73 highs and 61 lows now
Bill says the Sendai Racer is a particularly bearish pattern.
You have cited the last seven days of the eight day pattern. Eight days ago there was a large white candle (up day) which book ended the six indecisive days followed by the other book end (large black candle) today.
That is Bill's Sendai Racer.
He's a great guy.
Right, according to my analysis that first strong up session isn't a required part of the formation in order for it to qualify as a highly reliable reversal pattern. The important part is the hesitation coupled with the massive engulfing session, especially in the context of a rising wedge. All of us candlestick guys have our own ways of looking at things. :)
Thanks for keeping us all posted. It really does look ominous. I think that now would be a good time to take off...no, let me rephrase that...to sell my hedge positions (hedging against my shorts). I don't think I'll be needing the protection from the upside much longer and I still have a little profit left. I may be wrong but it looks to me as though we are going to fall lower throughout the rest of the day and get some (probably not too much) follow through tomorrow before there is any real bounce. Just my gut opinion, of course.
No, they don't have to be on a close basis and they are cumulative so they don't drop during the day. The number of new highs is now 77 so a few stocks are getting a little sugar. The odds of hitting the required number of lows will of course rise dramatically if the market falls much further. That number is currently stalled at 61. Stay tuned.
Thanks
Back in April we had two near misses a week apart. And last week we had a near miss coupled with today's results. None of them count officially of course.
So tomorrow the numbers are re-set to zero and we start over again. Now... I'm going to get some sleep because I have to do some work between 6 and midnight. 8 hours sleep in 3 nights isn't cutting it and my eyes are nearly crossed.
Symbol Last Change Dow 10,378.83 Down 265.42 (2.49%)
Nasdaq 2,208.63 Down 68.54 (3.01%)
S&P 500 1,089.47 Down 31.59 (2.82%)
30-Yr Bond 3.92% Down 1.09
Indices: US - World | Most Actives
Advances & Declines
NYSE NASDAQ Advances 632 (16%) 288 (11%)
Declines 3,225 (82%) 2,374 (87%)
Unchanged 75 (2%) 80 (3%)
Up Vol* 410 (41%) 104 (4%)
Down Vol* 583 (58%) 2,215 (95%)
Unch. Vol* 10 (1%) 10 (0%)
New Hi's 192 18
New Lo's 90 126
*in millions
more...
This is AR's deal, however, and I'm sure he knows more than I!
New Highs: 192
New Lows: 90
finance.yahoo.com/adva...
So bretkolman, what we're using here is the "New 52 Week Highs/Lows" on the NYSE. The StockCharts symbols are $NYHGH and $NYLOW. That is not what you're seeing in the data you're referring to.
New highs: 105
New lows: 67
I don't generally watch these on a daily basis, and I'd be interested to figure out why there are discrepancies. I'll do some digging.
I also use Pinnacle data - get updates every year or so. I find their data very helpful for historical research.
The Wall Street Journal (and Barrons) and The New York Times used to be reliable sources of 52 week new high and new low numbers segregated by market. I have not been tabulating new highs and new lows for the past few years so I don't know if they are still good sources.
seekingalpha.com/artic...
As an aside, my CTS has only generated 13 sell signals over the past 70 years, and only one of them hasn't resulted in a major move lower, so the odds are still heavily in favor of a confirmed long-term breakdown sometime over the next month or two. Market behavior through the end of August should tell us a great deal.
stockcharts.com/h-sc/u...
I use Stock Charts regularly and have never found an error in their data. I have not personally been tracking new high and new low data since about 2001 so I can not comment on that. I think you are on good ground to continue to use them, especially since other HO followers do that.
I found when I was tracking New Highs and New Lows that Yahoo often disagreed with the NYT and WSJ, but those two sources were in agreement.
The number of new 52 week highs is currently 40
The number of new 52 week lows is currently 73
BTW, here's a link to some great reading on the topic of the HO. It comes from Dr. Robert McHugh with whom I've chatted via email. He seems to be considered the "main man" to refer to when talking about the HO... although when I discovered that the HO was broken, he never mentioned that to any of his readers (I am one of those readers) until 6 weeks after I'd mentioned it here.
www.gold-eagle.com/edi...
He may have simply accepted the fact that perhaps we would be seeing a market crash without the HO ever signaling, while my focus was on the fact that many people were relying on the HO too heavily and didn't realize it was broken.
New lows currently at 74
Please keep in mind that no sudden catastrophe or magic happens when the HO triggers. The HO can even signal in a sideways market or in an up market, (providing the MacClellan Oscillator is negative on the day). The official numbers for NYMO aren't released until about 5:00 eastern but they're based on the number of advancers vs. the number of decliners (on the day). Those numbers are available in real time and they are currently negative. So I think it's safe to assume that as long as they remain neg. on the day, then NYMO will be reported as negative on the day as well.
New highs 65 as of 3:00
New lows 74
All we need is one more new low and a stick save at the close.
Highs currently at 68 and lows at 74 as of 3:18 eastern.
(edit): at 3:25 the number of lows has hit the required 75.
The stick save now would likely do it.
This is what would be referred to as an "Unconfirmed Hindenberg Omen Signal". It's "unconfirmed" because now we need to see a second signal within 36 days. It's possible to get that signal tomorrow or at any time really... or not at all.
The daily market internals data was just released and as suspected (because NYAD was negative), the Maclellan oscillator was indeed negative today. So this first signal is official in that "all" criteria were met.
As well, the data provided by the WSJ concurred in that if their data were used instead of StockCharts data, the signal still triggered.
As a matter of interest, no matter which day the HO signals again (if it does) you can expect it to be later rather than early in a trading day. That is because the numbers for highs and lows are reset to zero every day. Therefore it's cumulative and naturally takes a good portion of the day to build the numbers. We would never see a signal early in the day. For example, today's signal came at what... 3.50 p.m. or so?
On a side note and for what it's worth...
I have my own set of indicators, many of which I discovered all by my lonesome and some of which are based on market internals. Over the last few days they have been giving signals that a top is in. Today, a couple of them (a little slow to signal because they're based on weekly charts) issued a no bones about it "sell" signal. The indicator based on the NYSE gave me that signal but the same indicator based on the NAS has not yet done so. The last 2 times I got these signals from the NYSE were at the Jan. peak and at the April peak. For what it's worth.
ewtrendsandcharts.blog...
www.zerohedge.com/arti...
Today we're going to be examining the new highs and lows as we did yesterday using StockCharts' data, but we're also going to monitor those numbers as reported by the WSJ. In retrospect, back in the day that the HO was designed, StockCharts didn't even exist. On the other hand, considering that they are not "part of Wallstreet" I have a lot more faith in their data, especially in light of their stellar reputation for accuracy. It has become apparent that the WSJ numbers are usually larger (or more liberal) than those of StockCharts. I'll be honest, I don't understand the discrepancy but I tend to trust StockCharts more. I think the reason most other HO followers also use the StockCharts info is that is allows charting of the data whereas the WSJ's data doesn't appear on any charting service. But we're going to consider both sources today just to be safe.
According to WSJ, the required number of new highs was attained at about 11:20. It wasn't until an hour later that StockCharts reported the required 75. In any event, if the market sells off as the day progresses, we're likely to be seeing our second HO signal in two days. We're on the case........
Currently the number of new 52 week lows sits at 33 (37 according to WSJ).
I'd expect any gap up (if it were to occur) would be sold hard and instantly. If the market were to open relatively flat (no chance of that in my opinion) I would expect that if it were to make a relatively calm and structured rally, that the rally would be no more than perhaps 25% of the recent drop from 1129.
The news from Germany was fantastic... the reaction to it was absolutely shocking. This can not bode well.
"If something is supposed to go up and it doesn't, it's going down."
finance.yahoo.com/bank...;_ylt=AoH9mslAsKtgCC_g...
stockcharts.com/h-sc/ui
You need to look at $NYHGH for highs and $NYLOW for lows.
Now on Monday, if the market were to fall at the start giving the required number of lows, then rallies but not quite enough to produce the required number of new highs, we would have another near miss. This is exactly what occurred in April. What causes this phenomenon is not the market volatility but the fact that there are "so many" stocks near their 52 week lows and "so many" stocks near their 52 week highs... at the same time.
You may have the impression that it's the same 75 stocks each day that are making the new lows or highs. It isn't. Whichever stocks participate in the records on any particular day are but a sampling from a larger group. In other words, the market is very fractured and polarized. That's what the HO is really sensing, very weak market internals.
In any event, we obviously didn't get the second signal today. We'll stay on top of it next week.
Have a great weekend.
Precisely why a whole bunch of near misses are almost as good an indicator as a confirmed signal or two. This market has no meaningful underlying sponsorship. After you study charts every day for years and years, you develop an intuitive sense of market health, and this market feels sick (at least, to me).
Until Monday!
As far as that intuitive sense is concerned, yours is much more finely tuned than mine because I've been thinking the market has been feeling sick since October when the volume metrics betrayed the total insincerity of the rallies ever since.
Have a great weekend... drink lotsa beer.
seekingalpha.com/artic...
By the time we ran into that blatant distribution pattern during the second half of April, the market action was essentially screaming that a sharp decline was imminent. It all went downhill from there.
As far as subsequent objectives go, I believe our next test will be in the 1,060 area. If we take out that congestion support level, the odds of a break to new long-term lows (and the consequent confirmation of a new cyclical downtrend from April) will jump to about 80% according to my computer model. We'll see...
Have a great weekend.
Have a great weekend yourself. It's nice to hear your voice.
A couple of important suggestions I would like to make. Firstly we should not be too concentrated on the 75 figure. This is not in fact a requirement of the HO. The measure of confusion is 2.2% of issues traded. Today the number of issues was 3107 so 2.2% is 68 or 69 depending whether you round up or down. That means three days ago was a very near miss in deed. Given the very unusual history of the market for the past 1 to 2 years a near miss will probably prove to be relevant because as the HO has found it almost impossible to function (I think you used the term broken).
A second suggestion is data source. I know your main source is more accurate but the model was built on the WSJ. As someone trained in economics and history I believe it is always best to replicate or use the original sources. Sure the WSJ may be consistently higher or whatever, but that bias was built into deriving the HO. The 2.2% figure and other rules no doubt come from use of historical data fit. A 2.1% on a day means no HO under the rules but I bet it still means an elevated risk of a decline is coming.
Once more thanks very much you are doing a much appreciated job. And I new you had to be Irish!
Thanks also for your message. I hear ya' loud and clear. As I've detailed elsewhere in these instas, I'm aware that the required number is not actually 75, but 2.2% of the issues traded. But admittedly, yes I did focus on the number 75 when in fact you are correct. In fact, I can see that the WSJ data I used today also sports the "issues traded" numbers... an added benefit which I hadn't noticed until now. However it shows 3150 rather than the number you quoted of 3107. I suspect that's due to some after hours updates or something.
"A 2.1% on a day means no HO under the rules but I bet it still means an elevated risk of a decline is coming."
Of that, there is no doubt because what we're really trying to identify here is a fractured market... and a figure that represents 2.1% does that just as well as 2.2% does.
Thanks again for a great message.
www.bloomberg.com/news...
www.telegraph.co.uk/fi...
online.wsj.com/article...
The WSJ also had an article, but I'm not a subscriber.
Keep up the great work, Rocks!
One more thing, Seeking Alpha also mentioned the HO in the Market Currents, posted 4:53 PM, Saturday.
In any event, what we're really measuring here is the fact that internally the markets are 'secretly' becoming fractured or polarized. That's really what Jim Miekka was after when he designed this gem. As Wave Rider astutely pointed out in a comment above, "a 2.1% on a day means no HO (signal) under the rules but I bet it still means an elevated risk of a decline is coming." He's absolutely right.
I personally think it's a mistake for investors to confidently go about their trading from the long side in anticipation that the Omen might not signal again. They're right... it might not, yet the markets could crash nonetheless. And when the man himself, Jim Meikka, last week said he'll be "dancing close to the door", you can bet he's not holding long positions either. There are those who still hang their hat on the truth that the triggering of a signal by the HO also does not necessarily portend a market crash. That's true enough, but never before have we seen a world so awash in cash, yet not enough cash to thwart a coming credit collapse.
In this era, where even the Dubai crisis is not yet solved, let alone the Greek situation or the ones yet to emerge (the PIIGS are only the tip of the iceberg), I have little doubt that the the HO is dead serious this time. To top it off, Michael Clark's study of what he calls Day Cycles and Night Cycles, Elliott Wave theory, and the Kondratiev wave all point to the same thing... some sort of collapse is coming. Maybe not next week or next month, but when the HO also flashes an alert, man we'd better pay attention.
Thanks for posting those links BTW.
Hi guys, been reading this blog for several days. Can't believe I never heard of the HO b4. Sounded interesting, so I took a look back to 1985 and forward, armed with 1st occurrence dates and time til bottom, etc. At first I was a little confused, cause first occurrences often came near bottoms. After several attempts to make some sense, I started over and looked at it in terms of elliott wave theory. What I found was very interesting.
The 3rd wave of the great bull mkt began in august 1982, and until 2000 was a roaring bull . Most of the wave count in that extended 3rd wave is difficult at best, but all the different segments divide quite nicely into waves of 5, and many of the sideways corrections can be considered 4th waves, as is usual.
What I found was that during the bull mkt, most HO 1st occurrences came in 4th wave corrections, often near the end of the A wave, then a B wave rise, then the C wave then the 5 wave, then a bigger sell off. Often, since 4th waves are sideways their wasn't much of a down move. 87 was one of the best of course. Prechter lists the bottom of 87 as the 4th wave of the 74-2000 bull (never been convinced of that, it makes the move since 87 an extended 5th wave, instead of 3rd as I mentioned, but it really doesn't matter). So 87 was a 4th wave ABC correction with an unusually deep C wave. AND the first occurrence that year was sept 14, near the bottom of the A wave, then the B wave, then the huge C wave in October.
1st signals came several times after 5th of 3rd wave corrections, some times near the end of the correction, once at the beginning, right at the 3rd wave top. In july 98 the 1st occurrence was after a 5th wave straight line spike. The first down day was a huge engulfing candle, with a good down move that followed.
For the most part, though, the Omen seemed a disappointment. The straight up bull had few deep corrections other than 87, and then in the late 90's. And the signals came in 4th waves, so the best moves were often several months out after a 5 wave had been put in. Then we get to the bear mkt that started in 2000.
1-24-2000 we had a signal, again this was near the bottom of A of an ABC correction,the final 4th wave of the great bull, a 5 was put in and the bear started (looking at SPX). The next 1st occurrence was July 26, 2000, near the end of the first corrective rally, which lasted another 6 weeks. Sept 1 was the high of that rally, wave 2 up. On sept 15, a first occurrence again, now we are early in a wave 3 down, the longest and quickest area of movement in a bear or bull mkt. It lasted til April, 2001. ( I am labeling the bear of 2000-2003 as a simple deep zig-zag). To finish up, a list of 1st occurances and where they were relative to wave count: 6-20 2001, early in the following 5th wave down, nice move again. 6-20, 2002, after a big ABC correction, and resumption of the down trend, this one is late, in the middle of the 3rd wave of C, but with lots of downside to come.
The next several come during the rally from 2003 to 2007, and occur in similar places as the prior bull mkt, near the end of 4th waves and sideways corrections, with sparse down moves. In june 07, again right near the bottom of 4th of a 3rd wave, about 5 weeks before the top of 3. Nice move down into the final 4th of august 16. Then the final 5th tops Oct 11th. On Oct. 16 another 1st occurrence takes place, just days into the down move. And then June 6, 2008, right at the start of the 3rd wave down!!
So to sum it up, during bear markets, HO 1st occurrences seem to come either at the beginning of the bear, or at the beginning to middle of the important 3rd waves down. The dates I have used are what I found on the web in different places when searching for HO. I don't know if there are others I missed. From what Albertarocks says there were some close calls in april 2010, just before wave 2 up ended, and now here, just as we may be beginning a 3rd of a 3rd down. Of course the mirror image could also be possible, and we are near the end of a 4th wave and one more high above 122 in the spy is in the making. Time will tell.
I would love to know dates going back further than 85. Hope you find this interesting, and hope I didn't get too long winded.
skeptic
Another point is the occurrence in 4th waves is very logical. After a sustained 3rd wave rally, investors know intuitively things are over bought, and need a correction, and maybe this is the big one. The latter stages of the flat , time consuming sideways trend might shake out some, as they seem whipsawed. The thing I found odd was that after the 4th was put in, and the fifth, several months down the road the bigger sell off started and no HO during that longer and deeper slide.
As the bull wore on in years investors were sooner to hit the exits after tops. (you see this reflected in charts, as the tops get closer and closer together, until the final top is in, that is a product of astute crowd behavior, saying I'm back in but ready to bail at moments notice.)The sell off in 98 got the signal just a day or so in, after a steep straight upward 5th wave spike, again intuitively many would feel the mkt over bot. Then during the bear, the signals start coming early in down 3rd waves, which when you think about it, is the same place relative to the last top as a 4th wave, only now no new high, and a trend reversal is in. It all fits so nicely into crowd behavior, and shows that right or wrong investors are ready to jump to safety after extended 3rd wave run-ups. Now I better understand why 4th wave extremes are such technical magnets, they are places where critical decisions are made by investors as markets resume trend, and when it fails to be a correction and trend reverses you get such exaggerated 3rd wave moves as the crowd becomes aware of that reversal and piles in to the new trend. Makes sense to me!!
ken
You have put in an amazing effort skeptic, based on a lot of research and deep digging. I personally wouldn't go to the trouble of doing that though when it comes to the HO, since we never know with certainty until well after the fact, which wave we're in. But I certainly appreciate the effort you've put in here. Thanks for the very interesting information. You've also thrown in a myriad of questions and observations that beg questions. But keep in mind that of all the readers here who I know, none of them study Elliott Wave theory to any great extent (if at all). So I suspect that many of them won't be able to relate to most of what you've written. But I do study EWT so I can relate.
"What I found was that during the bull mkt, most HO 1st occurrences came in 4th wave corrections, often near the end of the A wave, then a B wave rise, then the C wave then the 5 wave, then a bigger sell off."
It makes sense that those occurrences are to be expected in a 4th wave (as well as in other structures such as in a wave 2, particularly if it's an ending diagonal) since, as I've mentioned here before, when the market is making wild swings in both directions, the atmosphere becomes ripe for a HO signal to trigger. That is usually what happens in a wild, sideways type of a wave 4 in an upward trend (wild swings). However, I personally don't try to equate what type of wave was occurring at the time a HO signal was issued because in reality, we don't even know with certainty which wave we're in right now. I have to throw Elliott Wave out the window when it comes to the HO. For example, right now most waver theorists believe we've just embarked on the beginning of a mighty and powerful wave 3 of wave 1. But most of them admit that until proven otherwise we could possibly be in the 'x' leg of a much larger 'abc' ('a' up, 'b' down, and 'c' up), which when completed would have taken the markets back up near the highs at 1220. We really don't know which wave we're in and won't know with certainty unless 1010 is breached. I can't emphasize enough the importance now, of the level of 1010. So consideration of which wave we're in has to be completely discounted.
"I think what you see, at least in recent years, on an HO 1st occurrence, is the flight to safety driving up bond type issues to new highs. It would be interesting to go back and look at all occurrence dates and see if the same types of issues are the ones making the new highs. Were these types of issues prevalent on the NYSE in the 80's or further back?"
There's no question about it, what makes the atmosphere ripe for the triggering of a signal is just that very phenomenon... flight to dividend paying stocks, which in itself is reflective of the "fractured or polarized" nature of a market. When fewer and fewer stocks are participating, that is the very cause of the HO signal. So without researching it, I think we already know that yes, it was the same type of issues (high dividend payers and perhaps bond related issues) that were the ones making the new highs during probably "all" of the previous HO signals.
I go about that particular research a little quicker and a little easier. I've created a chart which shows the ratio between XLP and XLY (consumer staples/consumer discretionary). The result shows that the stocks which are rising are the ones which produce "only what people need" and the stocks which are falling are the ones which provide "what people would like to have but don't need". Needless to say, it's very revealing since it moves in a very tight inverse relationship with the equities markets. Currently, a weekly version of that chart indicates that the ratio is on the rise for the first time since March of '09. This is confirmation of the very phenomenon you're referring to when you speak of the flight to quality aspect.
Thanks for a great effort here. Welcome to SA.
www.safehaven.com/arti...
www.metatube.com/en/vi.../
However, Tony is not telling many of us what we don't know already.
The event that could send us into a tailspin is a currency devaluation. It is becoming quite apparent that the economy has reset to new lower level of activity so tax revenues are not there to support fiscal spending so deficits continue at high level. Are we at the point of no return?
HardToLove
Art Cashin said the signal issued by the HO was the sign of a "confused market". As much as I like Art, I think he's confused on that one. The HO signals a fractured market with a number of stocks showing weakness and a number of stocks showing strength. That is typical "de-risking" as money flows into fewer and fewer issues that are considered "safe". It shows lack of confidence at the very least. I don't think there's anything confusing about that.
Your constant pulse taking is most helpful and though I can't bestow riches or fame on you guys, I for one, appreciate it greatly.
The disconnect in this country, the markets, the world, never ceases to astound me and I genuinely love the fact that there are people left that actually delve into the cake instead of taking the icing as reality.
Wish I had more to add, but since I don't, I can only add my thanks.
According to the figures from StockCharts, the second HO signal is likely today. BUT according to those of WSJ, another critically important rule is currently preventing a signal. That rule states:
"The number of new 52 week highs can not be greater than twice the number of new 52 week lows. THIS IS AN ABSOLUTE MUST"
So far, according to the stats from WSJ (which we'd probably be best to respect and use) that is the case. So at first glance, the signal appears that it's likely to trip.... but we're going to have to hang on until we can confirm the relationship between those two numbers... ie. 'will the number of 52 week highs exceed the double of the new 52 week lows?'.
Interestingly, if we used the numbers as provided by StockCharts (as I'd hard-headedly insisted on only days ago), we don't have that situation at this time.
stockcharts.com/h-sc/u...
.... you might remember that I'm blaring my horn about the fact that as the stock markets corrected last week, this ratio (the candlestick portion) is dropping even further (stretching the elastic band even further). Today it more or less gapped lower. This is alarming. It means that even though the equiites markets are falling, rates are falling even faster (treasuries are rising even faster than stocks are falling). The treasuries markets are running away from the stock markets and the stock markets, even though they fell heavily last week, can't catch up. Something is going to give and probably violently. Either rates are going to explode upward or equites.... well the pressure is certainly on equities.
In the meantime, the only thing preventing a second signal at the moment according to the WSJ numbers is that the number of new 52 week highs is more than double that of the lows. If the equities fell from here the number of new lows would rise, in which case a signal is more likely.
According to StockCharts, that is not an issue and if the markets were to fall from here (today) a signal would most likely be issued today. In fact, the market wouldn't even have to drop... the number of new 52 week lows according to StockCharts is currently at 63. A dozen more and we have another signal according to StockCharts' data.... providing NYMO is also negative on the day. At the moment I'm not sure where it is since $NYAD is higher (suggesting $NYMO is rising), but we won't know whether $NYMO is negative until after the close. If $NYAD were falling, we'd know for sure that $NYMO is also negative because it was negative at the end of last week. We may have to wait this one out until some numbers are released after the close.
New highs: 106
New lows: 81
I also have an incredibly close near miss for 8/11 from Pinnacle:
New highs: 105
New lows:67 (needed 68 to be official)
StockCharts shows lows on Aug. 12 at 75 and highs at 84. As I recall it was a squeaker and that the signal came at 3:50 eastern. However I was referring to StockCharts data at the time. I don't really like this method of answering your question Erik but it's only method I have. I didn't write the numbers down anywhere and scrolling up, I see that I didn't post the final numbers on Aug. 12th either, concluding that that was more or less a moot point.
I don't have access to the data records for WSJ nor any charts, so I have no way of knowing that one.
8/11
New highs: 89
New lows: 63
8/12
New highs: 83
New lows: 76
New highs: 209
New lows: 71
Although I bet a whole bunch of those new highs are risk aversion vehicles...
stockcharts.com/h-sc/u...
I have checked the history on WSJ and it was
Aug 11 105 highs and 67 lows
Aug 12 92 highs and 81 lows.
I found the point about changing composition of listings interesting and I am sure it will have had an impact over time. I also have been wondering to what degree the infamaous fat finger trade trade may be distorting the number of lows. ie there may have been a few lows put in that day that will not be breached today or tomorrow but todays or tomorrows figure would have been a year low otherwise.
Also liked the analysis of the HO agianst elliot wave although I know little about the latter. To me an important way forward from here if there is a confirmation would be to get a better idea why the HO is a better predictor in some instances rather than others. In broad terms a third of the time it is correct in anticipating a significant drop, a third of the time a medium drop, and a third of the time one that does not matter much in the long run scheme of things.
Once again thanks for the work AR. I am also a fan of your work Erik.
You mean let's see if we can tweak it into the holy grail. lol
I'm so worn out right now that the only thing I really feel like doing is moving to Salt Spring Island to start smoking pot and become a soapstone carver. Salt Spring is inhabited by most of Canada's most famous artists and other genuinely weird and wonderful people. It's one of the best kept secrets in the world so if I disappear don't tell anyone where to find me, ok:
www.gulfislandstourism.../
BTW, thanks again for your welcome comments Rider and welcome to SA.
.
www.mcoscillator.com/l...
online.wsj.com/mdc/pub...
s676.photobucket.com/a.../
For a waver, it may be a good confirming tool that a 4th wave is in and the next extreme , the 5th, expect a trend reversal. The problem is that you must be aware of the degree of the 4th, a small 6 or 7 day trend, and a one day 4th, only means we should rally for a day or two, and that is what is happening the last 2 days. On these charts, one occurance was in a very large degree 4th wave, and it took almost a yr to finish the 4th and the fifth!!
www.thestreet.com/stor...
www.thestreet.com/stor...
seekingalpha.com/artic...
For example (warning: my own horn is about to be tooted), my Cyclical Trend Score (CTS) has only generated 13 confirmed sell signals over the past 70 years, 12 of which were followed by substantial declines in the S&P 500 index. The CTS signals are rare, but when they do occur they are of high quality. It is the confluence of current indicators and signals, including the HO, that suggests great caution is warranted at this time.
HardToLove
With folks getting only snippets of the full story from Art Cashin, CNBC guests, Cramer, the confusion will add to the fear and make it easier to scare folks out of the positions.
HardToLove
But the changes make sense and probably refine the HO to be as good of an indicator as it was 25 years ago. I guess you could say he brought it back up to par. The one change that isn't likely to work quite like he's expecting is the fact that from now on we won't be looking at the 10 week MA on the NYSE but at the closing price of 51 days ago. IOW we're basically now looking at a 50 day MA which is pretty much the same thing as looking at the 10 week MA. But if the NYSE begins to meander very near the 50 day MA the HO could switch on an off a little more often than he's expecting, at least until it makes up its mind. In the purest form, what new rule is saying is that the current price of the NYSE must be higher than the price of 50 days ago. So when the market is open, we will be observing the candle of 51 days ago to determine the line in the sand. In the past you may have noticed that in the upper left corner of this chart, I had been occasionally listing various dates in white lettering and the level of the 10 week MA on those dates?
stockcharts.com/h-sc/u...
What I was doing was monitoring the level of the 10 week MA on a day to day basis. So when I reported the HO as being broken, I was actually using his new method (because it really is more accurate). Perhaps that's why I seemed to be the only person reporting that the HO was broken (intra-week), maybe I was the only person who knew it was broken intra-week or who bothered to monitor it that closely. Of course once the week had ended, it was easier to see that the 10 week MA had turned lower. Essentially I was one step ahead of Meikka on this one, so I'm glad he changed the rule because now I don't have to do that process any more. I'll simply make a new chart in a daily version, and without further ado... here it is:
stockcharts.com/h-sc/u...
Mr. Meikka has also changed the number of new 52 week lows from 2.2% to 2.5%, and now to 2.8%. It makes no difference, as long as we know. If he changes his mind again tomorrow, I hope he'll at least phone me. My number is 403-478-9... jeez, maybe I'd better not finish that.
In any event I think we're back on top of it again. Let's just hope this whole "broken or not broken" issue doesn't even enter the picture anymore.
And finally, the entire issue of the HO has gotten more confusing than it needs to be. In an effort to kind of reduce the noise I think it's probably a good idea if I keep my own comments here to a minimum. Either the HO is going to signal again or it isn't. You don't need to be bothered with all this superfluous stuff, although admittedly I am still trying to let you folks know before anybody else does. Why? I don't really know... it really isn't that important to know immediately because while a second signal would simply confirm an official Hindenberg Omen signal, the stock markets might completely ignore it.
HardToLove
You have done an exceptional job of keeping us informed and I, for one, feel like I have had a graduate level course in HO because of your efforts.
It is understandable if you don't keep writing the HO text book for us - after all, you must have a real life as well as your blog life. Briefer posts when there is news will be welcome and I hope you will continue to do that.
I hope I speak for all the participants in this discussion over the past many months when I say your efforts have been much appreciated.
Many thanks but not good bye.
s676.photobucket.com/a.../
The signals in a down trend definately show up in relation to EW differently than in an uptrend.
www.youtube.com/watch?...
www.tampabay.com/news/...
Plus, when taken out of context (as has been the case here) neither the HO nor any other single signal (boy those two words are hard to type together) is far less relevant than when considered along with all the other indicators pointing in the same direction.
Whether or not the market will tank is a different issue. If it doesn't fall in a huge downward correction, these experts can say (and they surely will) "see, it's all a bunch of hype, it didn't work". Of course it worked. But the notion that the market will not drop now 'for the reason that people have found out about the HO' is pure nonsense. And it will be just as nonsensical the next time it signals as well, say maybe a year from now (who knows when).
1. The HO has generated a flurry of interest in the past when it has triggered. It then fades to the obscurity of spaces occupied by a few like Robert McHugh, Jim Miekka and Albertarocks.
2. TA is an attempt to assess investor psychology. FA is an attempt to assess relative financial situations. The FA adherent who can not remain solvent as long as the market remains irrational could definitely benefit from TA. The TA adherent who buys a high momentum stock just before it craters might have avoided that with some FA.
Now I will concede to Erik that he is correct - FA and TA do have intersections and overlaps.
Been there. Done that. Lost the money. Couldn't get the T-shirt then.
Granted, there are often times when psychology distorts price action materially, driving markets or individual stocks to absurd highs and lows, but intrinsic value is always in there somewhere. The trick is being able to identify which is at play and to what extent. That trick is incredibly difficult and we all struggle with it, but it is also the challenge that makes market analysis so appealing to me. If it was easy, it probably wouldn't be nearly as much fun (although being a bored billionaire has its appeal as well). :)
When Doug Kass reportedly saw the "bottom of the year" it was because of RSI. He saw this three days after myself and John L. saw this indicator showing, well screaming, for a significant bounce.
Indicators are what we have right now to coax and influence our investing models, especially the short term ones. My investing model right now is to stay in as much cash as possible. Makes no difference to me if the HO has become mainstream news.
Because before it triggered, it wasn't. That fact alone to me nullifies the idea that, "if everyone knows about an indicator, than the indicator becomes impertinent."
Haha! Great point!
Full description: seekingalpha.com/artic...
Brief supplementary update: seekingalpha.com/artic...
This formation is certainly related to a head and shoulders pattern, but--in its current for--it is actually even more bearish. A second weekly close below the congestion zone in the 1,060 area would be a major bearish signal predicting a retest of the June low at 1,022. Obviously, a subsequent break well below 1,022 would confirm the start of a new cyclical downtrend from late April and forecast substantial losses, beginning with a quick trip down to 950. All JMO, of course.
In another column, over in OptionGirls Quick Chat "QC", I reviewed a conversation I shared with my Wells Fargo Senior Advisor about a week ago. His advice is much the same, as he expects, as does Wells as an organization, that the markets are in for a rough ride for the next couple of months.
Let me go find it, and haul it in here. Here we go (taken from QC #89):
####
Toe in the REE pond today with Molycorp.
Overall, and after a looooong conversation with my broker, I am going to stand pat, and not buy anything in the brokerage account until at the earliest, the middle of the fall season. Not going to be real aggressive with the gamer account either.
Here's a key point, which I believe Triple and others have been making. If the republicans gain control of the House in November, I will be buying the next day. If the blue dog dems somehow maintain control, I will be shorting the market.
Following are some other points discussed, not priortized.
Of course, if Israel decides enough is enough and bombs Iran in September, then I'm plunging into oil stocks. Is there something sneaking around about this I've been oblivious to during my extended trip? (Note: I was in Honduras for two months, Eric)
All the negative thoughts about housing, for me, are beginning to become more market related, than nationally related. I was beginning to see this months ago. Outside of Phoenix, Case Shiller has housing on a rebound in cities like Mesa and Glendale. Saramento is up huge in valuations, and San Francisco has also improved. Of course, there still is Chicago, and other markets, which will continue to slide. Broker said there was an article today on page two of the WSJ (though it could have been The Financial Times?)
So we have some improvements in some areas where KB Homes have been built, and also in areas where Wachovia/Wells has a lot of mortgages underwater. QE2 may add further help in these markets that are apparently rebounding. The big point from all of this is that "sytematic risk" in housing is off the table. What the government should do, according to my very conservative broker, and this is contrary to my innate beliefs, is to increase the expired tax break of $8500 to $15000. Clear the inventory as fast as possible.
Here are some sectors that are doing well over the past couple of quarters:
Farming (thanks Russia!)
Airlines
Exports (although recent numbers indicate a pullback)
Advertising agencies
GM and Ford auto sales skyrocketing in China. Domestically, Ford is NOT trying to meet demand with their popular Escort and Escape models. Sales in those models are on the upswing, and Ford has decided to let the dealers scream for inventory, rather than over produce.
Broker expects oil inventory to build out for the rest of this year, but long term, oil is a must have in any portfolio.
Teachers' pensions are growing logrhythmically, putting a stranglehold on many states. Expect the consolidation of school districts to reduce administration costs to the district's taxpayers. The education bill (in the House right now?) is merely a subsidy that forces states to commit to spending for two years, exacerbating, putting off the pension problems.
All in all, it seems like we're still in a period of volatility, and this will continue for a long, long time. Interest rates are going to remain low for at least three or four years. Inflation is far away. China will continue to gain in dominance. Sooner or later the dollar will wane, but I expect later than sooner.
####
As for the technical glitch you experienced, I am not sure what to say, except I categorically thought I had previously written a reply to your reply.
Go figure?
Thanks again!
All parameters have been met except the number of new 52 week lows which currently stands at 69. The number required at this moment is 83. If the market continues to drop, I can't see how that number won't be reached. In truth, the market could bounce from here and that number could still be hit. Stay tuned.
a.imageshack.us/img801...
HardToLove
Looks like we need a sell into the close. Since about 3:25 or so the popular indices have been headed down, but the NYSE composite has been bouncing up and down.
This article was released on Sunday I believe which states the number required is 2.8%:
www.mcoscillator.com/l...
If he's changed it up again without phoning me we should be ticked. lol
www.thestreet.com/stor...
The quote he referenced was on page two of the article. The article said that the reporter confirmed with Mr. Miekka, but he was quoted as saying that the change to 2.5% had occurred years ago. The article was published on TheStreet.com site yesterday. It also referenced 2.2% as outdated and 2.8% as being supported by others, but not Mr. Miekka. Having read both articles now I feel that one has to be wrong, misquoting Mr. Miekka. TheStreet.com article stated that Mr. Miekka confirmed that the HO was triggered on August 12.
If the 2.8% was used we would have missed the new lows requirement by 1 and there would have been no trigger. So, if my logic holds and Mr. Miekka confirmed both the 2.5% and the August 12 trigger, we just may be in business.
seekingalpha.com/artic...
If the rule is 2.5%, then we have the second signal.
If the rule is 2.8%, then we do not.
Either way, I hope it gets clarified because as of next Wednesday the HO is going to be broken once again unless the NYSE takes back all of today's losses plus some by then. If Mark or Erik or anybody else can locate conclusive evidence we'll have to go with it. It either did or it didn't... whatever this rule is, will decide. Sorry I have to run, but as John points out, I do have another life.
Have a great night.
"There was some argument over the exact set of conditions required for the ominous stock market crash trigger, but Jim Miekka, the creator of the Hindenburg Omen, confirmed to TheStreet that the Hindenburg trigger occurred last Thursday."
Then:
"While the Wikipedia entry on the Hindenburg Omen claims that the trigger is 2.2% of the NYSE total and others claim that 2.8% is the appropriate trigger, Miekka said that percentage was adjusted years ago to 2.5% to take into account the market move to decimalization."
www.thestreet.com/stor...
Can we finally say we have an 'official' and confirmed H.O?
Seems like we should use the original signals since they are in percents. 2.2% is the same no matter how many stocks are listed.
Why did the numbers change? Did I miss that!!
3101 issues traded, 75 new lows = 2.4%.
Hey kids, let's go back to the old rules, I don't like this game anymore!
But here's a kicker. Just now at about 12:20 a.m. I recalculated and the numbers reported by WSJ have changed considerably, so that 76.75 new lows are required. Would that mean 76 or 77? Which is it? Now the WSJ also shows only 69 new lows as having occurred, while at the close of the session it had just ticked over to 75. Who the hell knows what they're doing over there?
www.npr.org/blogs/mone...
I don't know what to think. Straight up... the WSJ changed their numbers from what they were at the close of the day. There's no way we can know if the HO issues a signal from here onward if the WSJ is going to jerk us around like that. But I think overall, the fact that so many near misses are occurring and each time that happens the market sells off hard within a week or so should be evidence enough that the market is fractured. As I mentioned months ago, I personally don't wait for the HO because I have plenty of other tools that guide me about when to go short or long. I went short for example in late April before the HO signaled. I was early but so what, at least I was short during the flash crash.
We'll see what happens tomorrow. Rumors have it tomorrow is opex. Usually they monkey around with the market pinning it wherever they need to in order to suck the most blood out of the put holders. I don't know where 'max pain' levels are tomorrow, nor do I care. I'm just sick and tired of the manipulation, period. I mean, for the equities markets and treasuries markets to be rising at the same time, in tandem, at a time when the economy is performing horribly.... that's just beyond belief, completely illogical. Bonds should be rising (as they are) and equities should be at least 30% lower... according to some pretty well known and respected people. And I'm not talking about Bozo the Cramer.
s676.photobucket.com/a.../
OTOH, I have to agree with skeptic and AR. The fact that we have been so close so many times probably tells us all that we need to know. I've gone short with about half of my funds and am considering adding to that position now. A confirmation might push me into a stronger commitment assuming that the HO has gotten the attention of enough folks that it may have become actionable if it triggers the second time. Of course, that would mean that I need to get my positions in place ahead of the crowd to reap the most benefit. I guess that's why we're all here!
But it looks to me that downward momentum is waning and that the market could bounce here. If that occurs, we will almost certainly get another HO signal today... until the WSJ changes their numbers some time into the evening and messes everything up like they did yesterday.
I have another question (to which I think I know the answer, but...):
If the MA and all other requirements are met on an intra-day measure, including the New Highs and Lows, but the market then swoons in the dying minutes of the session throwing the MA back below its required level, does that count as a trigger?
BTW Mark, at the moment there have been 3054 issues traded, of which 106 are unchanged. So we subtract 106 issues and end up with 2948 issues that have traded and have changed in some way.
2.5% of that number (2948) is what we need as a minimum... or 74 new highs and lows. That number could (and sometimes does) change throughout the day. And of course, the number of new highs can not exceed double what the lows number is.
NO! THAT'S A NO-NO... the number of new highs must exceed the number of new low.
Kudos to you for digesting my post of 08/17 @ 5:25PM regarding the appropriate threshhold levels for NH-NL in the HO. I'm sure if others would have taken note of the info provided, the group could have avoided the subsequent wringing of hands and scratching of heads over the correct percentage threshhold to use.
With due respect, I have to take issue with AR's answer to your query regarding the number of NLs allowed relative to the NH levels . In truth, according to Meikka there is no limitation on the number of NLs. They can be less than, equal to or much greater than the level of NHs. The only pertinent restriction is that NHs can be no greater than two times the number of NLs.
As to the form of MA, I have found no difference whether one uses the ten week or 50 day rules. Meikka continues to use the 10 week MA in his newsletter.
In using the HO tool, one should keep in mind the probabilities associated with the extent of market moves following HO confirmation.
78%.......-5%
44%.......-10%
30%.......-15%
20%.......-20% 0r greater
These moves have occurred within 120 days of the initial HO signal and 50% of the moves have happened in the first 41 days
Based on one's investment style you can purchase insurance via puts, go to cash, or go short to take advantage of the projected declines depending on your level of confidence in the severity of the decline.
On the plus side,the market has already declined 17% from its peak in April to its low in Jul, the presidential cycle calls for a low in the Oct-Nov period and the yield curve remains in bullish mode. In addition , there is the possibility that the inverse head & shoulders pattern will be fulfilled and break to the upside with an expected move to 1250 on the SPX. I would expect the HO to produce a muted response not to exceed a 5% decline primarily because the HO signal has made a delayed appearance well into the decline rather than its normal pre decline warning. Therefore , I will be buying puts as insurance to protect my long portfolio against the 1 in 5 chance of a further 20% market decline.
It would be interesting to hear what strategies others expect to employ during the next 120 days.
Good trading success to all.
Now... as Mark points out... what if the market tanks towards the end of today? His question is "will the signal be valid" if that brings the close of the NYSE below that of 50 days ago? I'd say yes, it's valid anyway. But I'm not Jim Meikka. In any event the market won't likely tank from here (today). Many pos. divergences suggested a bounce of some sort is due. In fact I must be nuts because I went long banks at the low today. I'm already scared sheepless about that. lol
Want to hear something else amazing? On Monday, depending at what level the NYSE closes today, we might open with the HO broken. Haha, somebody git me a beer, I've had enough of this already.
But seriously, it wouldn't be at all uncommon to see many signals in the next couple of weeks, or possibly no more at all. They'd all be a moot point from here on anyway... except that they would just continue to remind us that the market is fractured. I think "weak and polarized" would be a better description of what's being exposed here.
I suspect that the number of highs will be revised downward after the close unless we see further upward movement. I realize that the WSJ is the final word, but yesterday we went through a similar scenario and the WSJ numbers were adjusted in the end to approximate the stockcharts.com numbers. And right now the stockcharts.com numbers would not support the confirmation. New highs are only at 60 there as I write this.
I want this to over with and in the records as much as anybody, but I'm still leery of the intraday WSJ numbers. As a matter of fact, I'm getting kinda leery of numbers in general until the revisions are completed.
With these old criteria a good HO was triggered in '08. And was the type of market really that different then ?
Sometimes you tweak a system and get a version like Windows Vista. I have Vista, and I really miss my old XP.
ZH called a confirmed HO on the old criteria and I'm calling it official on the new criteria. But there was a valid reason to fix it tinshins. By the way, since Jim Meikka supposedly changed his criteria before '08, his signal in '08 was based on the same criteria we're using today (the new rules regarding what percentage of new lows and highs are required).
No, the market is not markedly different than it was in '08 from the standpoint of what issues are trading and look what happened after that HO signal. It 'is' different though in that the USA has borrowed a further 14 gazillion dollars since then and have used a lot of that to totally distort the markets. That's bad, bad, bad.
Have a great weekend.
Thanks to all who dropped in from time to time to see what was going on. I realize I got long winded a lot of the time, but when including explanations, that's just a necessity.
Have a great weekend and good luck trading. Get rich and buy me a beer some day, ok!
Mark Bern has already suggested that he would set up an insta for that purpose, has invited myself and has said he's going to be inviting you as well as probably Michael Clark and a few others. I don't know if he's "looking forward to it" or what he's thinking exactly. You might want to PM Mark about that.
seekingalpha.com/insta...
A confirmed HO is in the books, but it's just starting to get interesting. Let's see what happens...
I could not find ZH confirmation. Maybe I am blind.
AR what ever your choice I want to say it has been nice following along on this blog.
Thank-you and best of luck but please consider hanging around.
I will toast to you tonight. Hows that. My anniversary today and the wife will think I have lost my mind when I say "This it to AR, chears buddy!!"
I couldn't find the ZH article either, but who cares?
I'm glad you followed along guns, but I know you've been on a mission for quite a while now. If you're gonna toast AR tonight and your wife thinks you've lost my mind... just tell her that you've got a good friend in Canada who you're gonna meet someday, God willing.
Happy Anniversary, and cheers right back at ya. Give your wife a squeeze for me.
All the best.
Guy
As a statistician and economist perhaps I can weigh in on the discussion of the modification of the HO.
We have had a commonly accepted HO definition for some years based on a 2.2% rule and use of the MA. It seems that has now been modified by the creator, presumedly to get a better data fit which in turn means less signals and more reliability.
The problem is that we don't really know anything about the reliability of this second indicator (I will call it H2O) We do know a lot about HO. If it is confirmed we have about a 1 in three chance of a significant correction. Given the number of ocurrences in the past 25 years this would mean the real probability of a major decline at a high level of statistical reliability is 1/3 plus or minus 1/6.
We don't know anything about H2O but let us assume that it gives a slightly higher historical occurence of a major decline but the evidence was based on less history of triggered occurrences. The problem is that the statistical reliability declines with the reduced number of historic occurences. Hence while it looks a better predictor it may not be at all, it may have refined itself to only giving a random pattern that looks better.
My point is that until someone does the same work on H2O as Dr. McHugh has done on HO I am happy to stick with HO as I know its reliability. On that basis assuming a trigger of 2.185% on Aug 19 is close enough to 2.2% (and hey that is close enough to 2.2% for me) we have in fact had 3 HO sitings and 2 H2O sitings.
Perhaps what needs to happen is that the two series get run by analysts much like VIX keeps two different method series or nations have several series for CPI on changing definitions.
Anyhow, it probably doesn't matter for now but once again thanyou AR for the great work. Even though I have followed HO for years I have learnt a lot more about why and how it works thanks to you and the other contributors.
Have a great weekend
And a big thanks to AR (who really rocks!) when it comes to TA and especially the HO!
Regarding the TA blog, I'll contact y'all via PM soon.
Congratulations and happy trading to all!
www.zerohedge.com/arti...
John.
I had heard of HO a few years ago (2? 5?), so wasn't coming in totally blind, but I have learned so much about the signal, I am forever grateful, especially for all the work of AR.
This blog has also enlightened me to many other trends/analysis, that I knew nothing about and now at least have a search term to learn more.
Thanks all, at least my appreciation is currently overriding the horror of what the HO could mean. Small victories.
NYA 6813.15 -37.30 (-0.55%)
Index Description
The NYSE Composite Index is designed to measure the performance of all common stocks listed on the NYSE, including ADRs, REITs and tracking stocks. In January 2003 the NYSE reintroduced the NYSE Composite Index under a new methodology that is fully transparent and rule-based. Under the new methodology, all closed-end funds, ETFs, limited partnerships and derivatives are excluded from the index. As of year-end 2004, the NYSE Composite consists of over 2,000 U.S. and non-U.S. stocks. It is a measure of the changes in aggregate market value of all NYSE-listed common stocks, adjusted to eliminate the effects of capitalization changes, new listings and delistings. The index is weighted using free-float market capitalization and calculated on both price and total return basis.
jamesgoodeonthemoney.b...
kingworldnews.com/king...
If this is correct AR, then another HO will have to be triggered in March of 2011.
4.bp.blogspot.com/_OpW...
Rocks: Another HO! Eke!
HardToLove
By the way, how ironic it is that the late day rally was what set off the HO signal today. It was that rally that produced enough new 52 week highs to complete the set of requirements.
*if* the retail investor has "left the house" (along with Elvis) *and* institutional and mutual funds have seen *tremendous outflows *and* only the PPT, da boyz, hedgies and HFTs are trading, stealing 1/10 pennies from each other, ... etc., etc.
Can we really attribute the same weight to an indicator developed when none of the above conditions were true?
I *do* believe a fall is coming, but I *do* believe it may or may not hit in the typical time frame following the HO trigger.
I believe it will hit when the PPT, the Fed, the treasury can now longer artificially support the various segments they have been trying to support.
IOW, they've been juggling their, and everyone else's "balls", and they're going to drop them sooner or later as they run out of hands, arms, knees, ... to juggle things on.
The fact that the bonds had to depreciate today, ostensibly in order to drive the market back upward, may lend some credence to this thought, which is based on pure supposition, theory and hyper-imagination by me.
No knowledge was required by me to formulate this blather.
HardToLove
There is just no more logic in the markets. They're very dangerous for bulls and bears alike. Have you ever watched the Asian markets? There is no such thing as an open that isn't a gap of 1% one way or the other. It's been that way for years. I've always thought "god, how difficult it would be to trade a market like that". And now we have one of our own. I just don't know man. I just don't know what the answer is.
"Basting is a cooking technique that usually involves cooking meat with either its own juices or some type of preparation such as a sauce or marinade. The meat is left to cook, then periodically coated with the juice"
en.wikipedia.org/wiki/...
$BPNDX
$BPSPX
$BPCOMPQ
$BPNYA
All of them are very bearish. But I guess nobody told the PPT that.
www.cooking.com/Recipe.../
www.sharechat.co.za/in...
I don't think that ultimately the dollar's fate (increasing demand for at least the coming year or two), nor the stock market's fate (toilet tank special) are going to be changed due to anything Ben the Rat says. It's all about the bond markets and interest rates... things Ben does not control. It's all very interesting to say the least, but enormously angering at the same time.
In any event I'm even more convinced now that the market can't go much higher with the 'ease' they've become accustomed to. Take a look at this chart. It's a thing of beauty if you're short. It shows that the big volume is above us how. If the orcs want to continue to drive the market higher, there's no way they're going to be able to do it on light volume as they have since October. The market has sliced right through that heavy volume price area and I didn't even realize it until today:
stockcharts.com/h-sc/u...
Have a great weedend :-)
I was wrong. Unbelievably, after today's incredible pump job, the market internals did not improve slightly today as I'd suggested they would, they got destroyed even further. NASI is down. NYSI is down. ALL bullish percentages are down, some of them hard. NYMO bounced a bit producing a slight pos. divergence that will get wiped out on Monday if the market falls on Monday. This rally WAS NOT on improving internals. Even $BPFINA (bullish percentage index for financials) was down almost a full percent. The market internals have been whacked on the head hard every single day since Aug. 12th (the day of the first Omen signal ironically) INCLUDING TODAY. This is no less than stunning. On the other hand, it is absolutely confirming what the HO has been warning us about... that the market is fractured, confused, polarized, emotional.... add your own adjective.
However, the number of stocks above their 50 day EMA did improve on all indexes. The mighty Nasdaq saw it's percentage of stocks above their 50 day EMA rise to a mind boggling 30% from 22%. Now if that's a bull market, then we're in a bull market I guess. All kidding aside, we have to recognize that it was an improvement and all new rallies have to start somewhere. Yet the other internals simply can not be discounted. They're a disaster at the present moment. Of course most can be repaired. But if a rally day like today didn't repair them one iota, I can't imagine what it's going to take.
.
investorshub.advfn.com...
HardToLove
HardToLove
Sometimes I think HT's brain is a computer.