In the chart below we see the latest picture of what the NYSE is doing as well as a very easy-to-follow method of monitoring whether or not the Hindenburg Omen is obeying one of its most important rules, that being whether or not its 50 day moving average is rising. As you can see, as of the close on November 13, 2013 that moving average is on the verge of heading south. In fact, unless the NYSE puts on a spectacular rally over the next 10 days the HO is about to go off line. And of course if that happens the HO as an indicator can no longer issue a signal. But we will continue to monitor the new highs and new lows anyway since they still provide a great view into the market internals and can help identify when the market is highly polarized with an unusually high number of new lows being achieved at the same time as an unusually low number of new highs.

_{Click here for a live and updating version which I try to keep updated each day.}

As a brief summary of recent activity, we can just state that the HO has really been humming for the past couple of weeks, particularly the past 5 days or so. We've had what should probably be considered as a series of "near misses", the closest one having occurred on Monday, Nov. 12th. On that day had the NYSE been able to register just 9 more new 52 week highs the HO would have issued its first signal since it last went off in August of 2010. As I told the readers back then, even though the Hindenburg Omen hadn't officially gone off, the message was still abundantly clear... the market is at a degree of polarity not seen very often (meaning that while the steady heavy horses were still trying to pull the stock wagon up the hill, nearly as many were on the other end trying to pull it downhill). And as one could easily imagine, those that are trying to pull a wagon 'downhill' are likely to be the winners. And when one of those heavy horses named APPLE (pictured below) is pulling 'downhill', guess which way the market is going to go.

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Nevertheless, all this scary activity doesn't mean that a rip-snorting rally can't still occur. It certainly can and don't be surprised if it does. In fact, I personally expect some upside action at any time now... at least a bounce. But that's all we should be expecting... A BOUNCE. That's the message from the HO... to be long at this stage in time is a very dangerous proposition.

So we continue to monitor the situation. As always, comments are welcome.

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

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

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

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

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

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

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

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

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

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

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

First of all, I offer my sincere apologies to readers for having accidentally reverted the last insta on the HO topic back to 'draft' form. I didn't realize I had done that. However, I 'do' remember having come into the editing room to update the chart. SA had made a few changes to the editor, changes which I'm not particularly enamoured with, and since I no longer write articles nor instas on SA, when I ventured in here I wasn't quite as familiar with the surroundings as I had been originally. Bottom line... I didn't notice the final "publish" button way, way down at the bottom of the page. I didn't click it. Needless to say I'd prefer not to think I'm an idiot, but when the evidence for that conclusion builds it's time to sit yourself down and give it some thought.

(click to enlarge)

_{[My friends were saying the link to the last insta quit working. I need to think a few things over.]}

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In any case, thanks to the notification from FPA and the persistence and patience of our friend K202 we were able to get the previous insta back on line. Special thanks to those two fellas... Mark for his "staying on the case" and FPA for having gone to the trouble to contact SA to find out what the problem was. Thanks guys :-)

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Here's the latest 'picture' of what the NYSE is doing and showing where the HO stands from the perspective of whether or not it's obeying the rule that its 50 day moving average must be rising. As you can see, that moving average turned lower last week and the NYSE is struggling mightily to get back above its price of 50 days ago (orange line):

_{[Click here for a for a live and updating version. I try to keep it updated each day.}

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Obviously it's been very quiet in here in recent weeks, a reflection of the fact that there has been very little to report about on the HO front. The numbers of new 52 week highs had been rising normally throughout the early stages of the rise off the November low. But as we got into the first week of February the average number of new highs began to decline markedly. In the chart below, we smooth out the statistics a little bit by focusing on the white 7 day moving average of new highs:

_{[Click here for a version which updates each day shortly after the market closes.]}

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Really, there nothing overly ominous with the chart above other than the fact that the numbers of new highs had begun to deteriorate markedly in early February even as the markets chugged ever higher. Obviously that divergence had to lead to 'something', either an improvement in the market internals where more stocks suddenly started to turn higher - OR - a correction in equities. Normally it would be the latter and that's indeed what occurred this time as well.

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

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

---------------------Mystery City.... is Vancouver-----------------------

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The Hindenberg Omen is once again back in operation. However, as evidenced by the price action of 50 days ago, it would appear that the HO might be in danger of going off-line yet again should the NYSE head lower in the last few days of December and the first week of January. Such action would cause the 50 day moving average to turn lower around Jan. 9th or so. Perhaps sooner if the NYSE were to head sharply lower before that date. For quick reference, here's a 'still picture' of how we measure the all-important 50 day moving average. Feel free to click the link at the bottom of the chart for a live and updated version:

(click to enlarge)
Live and Updated Version

We will now pick up where we left off, since the odds are very high that if/when the HO issues another signal, it will almost assuredly be something we dare not ignore. The main thing to keep in mind is that due to its rather strict requirements, any signal from the HO will likely be issued somewhat late. "Late" being a relative term in this case. It may seem 'late' at the time a signal is issued but if history has any say in the matter, it could well turn out that the signal actually occurs relatively early in what has sometimes turned out to be a severe pullback. In a perfect world, the HO would have issued a signal at some point last May. Unfortunately, for the reasons given above... it didn't. Not "officially".

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I'm pleased to announce that on December 10th I published the first entry in my new blog. For the longest time I had been very reluctant to create a blog of my own, but for so many different reasons (trolls on other sites being the main one) I finally decided that it was probably better if I do. It's also about the only way any of you are ever going to see any of my technical work other than the HO business since SA is unfortunately so non-supportive of articles that are based on TA. You'll also find links to blog sites that I visit often, most of which are run by like-minded friends of mine who are also analysts and technicians. It's a work in progress but so far it's progressing nicely. So if you find that kind of stuff at all interesting, please bookmark it and check in every now and again as more content will be added on a semi-regular basis. I will also assemble and publish articles there, which feels a bit strange since up until now I've always used an editor at somebody else's site. Albertarocks' TA Discussions

In April of this year I wrote an article on this topic and it provided some pretty clear evidence about what really goes on in the relationship between AAPL and the NASDAQ. I can save you some reading time by just showing you one of the charts from that article and providing a brief explanation right here about what actually happens in the case of one of the largest cap stocks in the universe.

The chart is showing the ratio of AAPL:NAS. Most of you know what ratio analysis is, but for those readers who might not quite understand what a ratio is all about, it's just the price of the AAPL stock divided by the price of NAS. Most ratio analyses are extremely revealing and in fact, all currency trades are basically the trading of ratios. Buy one currency and sell the other against it.

So when the candles on this chart are rising, AAPL is outperforming the NAS. And of course, when the candles are falling, AAPL is "underperforming" the NAS. Therefore, we can consider this ratio as a "leadership gauge". As this weekly chart reveals, AAPL has basically been outperforming the broader NAS 100 for a long time (we're not talking about the entire NASDAQ here, just the NAS top 100). In fact, this phenomenon of AAPL assuming leadership began very clearly and very sharply in October of 2004.

The most critical thing to understand when reading ratio charts is that when the ratio is rising, it means AAPL (in this case) is "outperforming" the NAS (in this case). I say "in this case" because these rules apply to 'all' ratio analyses. When the ratio is rising, there are several scenarios that could be in play. It 'could be' a case where the NAS could be in an absolute freefall and AAPL might be falling as well, but not as sharply. Or AAPL 'might be' holding steady while the NASDAQ is crashing. Or AAPL 'might be' rising and the NAS falling. Or it 'could even be' that both are rising, but that AAPL is the main horse pulling the wagon, so is rising at a sharper pace... with the rest of the NAS rising as well, but without much oomph. What's important is the DIRECTION OF the ratio, because when the day comes, as it surely will, that AAPL starts to "underperform", you can bet your bottom dollar that the NASDAQ is either already crashing or on the verge of crashing. We'll know this with 99.9% certainty. I wanted to say "100%" but nothing is certain in this life except death and taxes and the fact that I'm getting sick of Disqus.

Click here for a live and updated chart

There are two main things to note on this chart. First, that when the ratio is falling, when AAPL is underperforming the NAS, the NAS cannot rise. There have been a few rare and brief periods when the candles are basically heading sideways and that represents a period when AAPL and the NAS are moving at the same rate. They might both be rising or they both might be falling but whichever it is, they are moving at the same rate. This is very, very revealing info since it clues us in to the fact that even if the market is going sideways or falling a bit, almost assuredly the market is still relatively healthy.

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As this article was being published on Danno's site, here's where I inserted this daily chart... and the entire thing vanished. But here at Seeking Alpha, we're very safe. So we continue.....
God bless you SA!
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Here is the daily chart from that previous April article:

Click here for a live and updated chart

The second and equally important takeaway from these charts is to notice that the peak in the ratio "always" occurs "after" the peak in the NASDAQ. Is there any question why this phenomenon occurs? There shouldn't be. It's because in times of crisis, the powerful horses are viewed as a safe haven, the best place to park your money in a time of fear. BUT... when the safe haven of AAPL is suddenly deemed as perhaps not such a great investment after all, money will start to flee from AAPL, AAPL will start to "underperform" and all hell "will" break loose. When a meaningful ratio of this significance turns lower, it represents what essentially will become a full blown meltdown in equities. When I say "full blown", I'm referring to something at least as big as the pullback in May, June and July of last year. Potentially, something much bigger.

Therefore, I don't even look at a chart of AAPL. I don't care what AAPL is doing. I only care what the ratio is doing. To be honest, I exaggerate a wee bit just to make a point, but you get my drift. But I truly 'do' focus on the ratio and not on necessarily on AAPL itself. Having said that, I also 'do' look for a top in AAPL since that would give me a heads up that the ratio 'might be' getting ready to head lower soon.

So the bottom line folks is this: Just because AAPL stock is strong, please don't draw the wrong conclusion that all is well in the world of stockdom. The very opposite will be the case at a market top. In fact, we should have been expecting AAPL to be surging and outperforming the NAS as we draw closer and closer to the ultimate peak in equities. I certainly have been since I first wrote on this topic in April, and now it's all unfolding just as this analysis revealed that it would. So obviously the markets are falling pretty hard. But when that ratio starts to turn lower, any drop that has been occurring in the broader equites markets will only seem like the warm up. Guaranteed. One final note... the ratio "doesn't necessarily have to" drop in the immediate future. But at some point it will, and when it does....

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For those who might be interested, the next insta I put together shows the relationship between copper and the S&P 500 and delves into a study which shows definitively that the relationship between the two is now issuing a dire warning... get the hell out of stocks. That article can be found here:
seekingalpha.com/instablog/357305-albert...

ORIGINAL ARTICLE:

Every once in a while the Baltic Dry Index is brought to the forefront for discussion. This is one of those times and I guess for good reason since it has dropped 53% this month alone. Are you kiddin' me? Wow! This shipping index deserves another look to be sure.

I personally haven't used the $BDI for the purposes of trying to gain any timing advice regarding the broader stock markets in the past 5 years at least. I'll explain why a bit later on. The theory is that since it's a kind of transportation index it gives an indication of the health of the global economy. So in that respect it's different from the Transportation Index ($TRAN) or statistics on rail traffic which are both based on the US economy alone. By far, the $TRAN and rail traffic studies offer much better guidance on the timing aspects for the North American markets. Further, the $BDI is a measure of the prices charged for carrying ship cargo that, well... that is not liquid. In other words, basically it's a measure of prices charged for the shipping of dry goods such as coal, wheat, lumber, goats, automobiles, steel, goats, textiles, electronic goods, goats, furniture, etc. Did I mention goats? But it doesn't include oil. And neither does the CPI data and we know how accurate that ridiculous measure is. But for the purposes of measuring the health of the global interactive economy, the $BDI does offer a general clue. Currently, the Baltic Dry Index has pulled back a bit from its all time high of May, 2008. Down by 93.8% to be more precise.

Although there are those who claim to see signals from the Baltic Dry Index that give clear indication as the the future direction of markets, I think those virtues are restricted to only the grandest of scales. There are a couple of good reasons why the $BDI should be considered unreliable as an indicator for 'timing' the markets. The first is that although it measures prices paid for shipping cargo, this is not a measure of the quantity of cargo being shipped. The second and equally important reason is that it tends to be rather capricious. At times, when the index is tracking the equities markets quite nicely, it can suddenly veer off course without warning. The habit of 'suddenly veering off course without warning' is not a particularly endearing characteristic to have at the best of times, let alone if you're in the shipping industry.

In any event, the correlation between the $BDI and the global equities markets should actually be recognized as as being rather flimsy because there are just too many other factors that affect shipping rates. Those factors include the all-import consideration of new cargo ships that are about to hit the water. Not to mention the question of what will happen to future shipping rates as a consequence of the number of new ships that are 'planned', those that are indeed already 'on the drawing board', those that are currently 'under construction' as well as those that are about to be launched. The effect of these added factors becomes quite apparent by noting what happened with the $BDI relative to the world's largest stock market (as proxied by the S&P) back in 2005, and again in the winter of 2010. But generally speaking, yes of course the $BDI normally wants to move in the same direction as the global economy.

We're only going to look at one chart of the $BDI... but in two different scales. First up... the weekly chart in logarithmic scale which in all respects is the best one to use when we're dealing with charts showing large moves on a percentage basis. The most amazing phenomenon to note is the stunningly wild swings that are completely normal for the Baltic Dry Index. Each and every one of the white dashed lines on the chart below represents a move of 44% or greater. There's no getting around it, this would be a remarkable characteristic for the movement of any market or index. The graphic below represents the very epitome of 'volatility':

I draw your attention to the 3 blue rectangular boxes, particularly the one on the left. For nearly a full year encompassing almost all of 2005, the $BDI was on sell mode and yet the correlation with the equities markets was pretty much zero. In fact, in that period of a single year the $BDI lost 72% of its value and the global stock markets didn't even flinch. In fact the S&P gained approximately 17% during the same period. A similar event occurred in the second blue box depicting late 2010.

But on the larger picture, the most stunning statistics are these:

The $BDI peaked in May. of '08. By time it hit bottom 7 months later, it had lost 94.4%.

From its Dec. low, when it bounced, it bounced hard...gaining 547% in 6 short months.

And more recently, between late '09 and today, the $BDI has again lost 84.4%.

Net result... between their respective peaks of late '07 through to today, while the entire NYSE has lost 24.2%, the $BDI is currently sitting with a loss of 93.8%. And that my friends, is not a sign of inflation within the shipping industry. And whether there be new ships hitting the water or not, neither does it signal any great degree of robustness within the global economy. Perhaps it signals the opposite? Oh, I think maybe that's what it's signalling. Imagine the agony those shipping giants are going through when they are unable to charge higher prices for their services and yet the price of their greatest expense, fuel, continues to hold at a high level. What's going to happen to those shipping giants when oil spikes due to a certain to occur war with Iran? They're not going to gain anything from shipping oil that's for sure. Neither are the oil shippers because if there's any one thing we can be totally certain of, it's that once that war breaks out they'll be shipping less oil, not more. Surely at least a few shipping corporations will be facing bankruptcy sooner or later. And that prospect could hardly be viewed as providing an inflationary outcome either. Sombody's not going to be paid back the money he's owed. Needless to say that prospect too is the very definition of deflation... the disappearance of money right out of existence.

And now for a different type of drama effect (as if the log scale wasn't dramatic enough), we look at the same chart (shorter time frame though) in order to zero in on the more recent action and using the more commonly used linear scale:

Man, if that isn't a classic cup and handle pattern I don't know what is. What I do know though, is what happens when I turn a cup upside down. I get a friendly reminder from the Maitre'D that if I keep doing that I risk being tossed from the restaurant. The other thing that happens is that all the contents of the cup spill out. From that aspect, the outlook for the $BDI is all of a sudden looking quite grim indeed. The only saving grace might be the Dec., 2008 low of 663. Will it hold? It's very difficult to say of course, but with the downward momentum currently behind the $BDI's January crash it's difficult to imagine what kind of miracle would arrest the decent at that level. Before we could even begin to consider a bottom in this amazing crash we would want to see at least some form of stabilization. But wait! We just did! And the Baltic Dry failed miserably to advance after a full 8 months of consolidation followed by a false break-out. That particular type of pattern in itself is a very bearish event. We would have to see prices improve to the point where, at the very minimum, the 6 week moving average turns higher. One question often asked is "Well it has already lost 85% so how much further can it fall?" And the answer as always, is of course: "It can fall another 85%".

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All of Albertarocks' articles can be viewed here.