Over the past few days I have been asked a few times about what is happening with the Hindenburg Omen. I assure you, I have been keeping tabs on it every day but really in the past few months there has been very little to report. I suppose the most notable item is the fact that since the first part of February the number on new 52 week highs being generated by the NYSE has been diminishing even as the market continued higher right into April. And of course, when the markets sold off in April, so did the number of new highs. But throughout all the action in the past 6 months, the HO really hasn't come all that close to issuing a signal. That isn't to say that it didn't still reveal some real market weakness... it did do just that, especially at the April low. But that isn't the Hindenburg Omen's job (to alert us to market weakness at a low in the markets). The HO is almost binary in its performance. It either issues a signal or it doesn't, one or the other. Also it can be switched off in binary fashion... it's either "on" or "off", due mainly to what is happening with the 50 day moving average of the NYSE. And this is actually quite natural because at a market top, the 50 day moving average rolls over. Usually it's not clearly defined though and that average, just like any other, can 'flicker' up and down while in the process of turning over. and that's exactly what flips the HO on and off at a market top.
And I can report that as of April 19th the HO has been switched "off". It cannot issue a signal no matter what happens with the dynamics of the new 52 week highs and lows because the 50 day moving average on the NYSE is pointed lower and will remain lower for quite some time to come. At this point I'll insert the chart I use for monitoring this metric alone... the 50 day moving average on the NYSE:
|I try to keep this chart updated on a regular basis. Bottom line is that price on the NYSE absolutely must be higher than the orange line in order for the 50 day moving average to be pointed higher. If that MA is not pointed higher... the HO is switched off, unplugged, batteries removed. Click here for the latest updated version (usually updated every day).|
I would also like to assure you that if the Hindenburg Omen gets real close to issuing a signal (once it comes back on line of course) I will report on it here. Further, if the HO 'actually goes off', I will be issuing a new post dedicated to that event and the necessary follow-up. So no worries, stay tuned to this station and you "will" be kept up to date.
UPDATED Apr. 10th - Just with a simple comment in the comments section.
Perhaps some of you are wondering what has been going on with the market internals now that the torrid ramp job in the markets seem to be slowing down. I apologize that it's been so quiet in here, but really there has been so little to report.
Basically, during the last half of the run-up the number of new 52 week highs (say from early Feb. onward) has become very anemic and has fallen off sharply, especially as of late. From the beginning of the rally though, starting in November, those numbers had been rising nicely. Here's a chart showing what the production of new 52 week highs looks like graphically: In order to smooth it out a bit, it's probably helpful to note the white line which is a 7 day moving average of the new 52 week highs. You'll also note how badly it is diverging from the rising NYSE:
New 52 Week Highs
All this is telling us is that the rally is weakening considerably. However, during the past week or so, the numbers of new highs has been so low that it has actually been "too low" for the HO to issue any form of warning. Really, the only warning we're getting right now is the evidence shown on the chart above.
As far as the new 52 week lows are concerned, they too have been so low as to not be raising any warnings yet... averaging about 25 per day as of late, and remaining relatively steady.
So that's the reason I've been very quiet in here... the market is relatively fragile and is in range of triggering an HO signal... but the stars just haven't been aligned for it to occur. If we get fairly close though, you'll be the first to know.
UPDATED MAR. 6th -
At the end of trading today the numbers are quite muted. According to the WSJ they are as follows:
New highs - 25
New lows - 30
And for backup, according to StockCharts there are 28 highs and 27 lows. So I think we can trust the WSJ's figures for today. Bottom line is that although the numbers of new highs had been incredibly anemic running up to the recent top, the HO is not all that upset just yet. I'm guessing that on the next bounce we'll actually see both numbers increase from today's levels.
Yesterday, when I posted a notice on a few sites where most of my friends hang out, that I had some news on the HO front I had also mentioned that I was a bit taken aback, surprised that the HO had sneaked up on me and had come so close to issuing a signal so quickly. It was almost embarrassing because if anybody is on top of this issue I'd say it's yours truly. I've been doing this for 29 straight months now. I'd mentioned that I was almost caught with my pants down... feeling like I hadn't been paying close enough attention.
Let me explain why I was caught off guard. Yesterday (Monday) before the market opened, there were only 42 stocks that were even within 2% of hitting their new 52 week low. Therefore, considering that 85 new lows would be the minimum requirement I knew that the odds of seeing an HO signal yesterday were very remote, barring a heck of a pullback in the equities markets. No such pullback was in progress. Why then were there suddenly so many new lows?
Carrying on with the explanation... with about 2 hours to go in the trading day I was stunned when I checked in with the Wall Street Journal (the only official source of data for the HO) to discover that there were already 61 new 52 week lows. The highs were also nearly sufficient for a signal to be issued so suddenly it appeared that the HO would come much closer to issuing a signal yesterday than I thought possible. After the market had closed, that number for the new lows was reduced by one unit... to 60 new lows. That type of after-hours adjustment is very common.
As it turns out, my dismay was well placed because the Wall Street Journal had indeed been publishing false data all day long. I didn't discover that until I returned to my desk last night at midnight. At that time the WSJ had changed it's data and were reporting that only 20 new lows had been established yesterday. What the hell? So I checked with StockCharts and sure enough, StockCharts was also reporting 20 new lows. So the bottom line is that as long as the WSJ cannot be trusted to issue factual data, how can I blame myself for being duped like that. I can't... and I won't. But let's give the WSJ the benefit of the doubt and trust that it was a one time glitch (HINT: It wasn't the first and it won't be the last). But since the developer of the HO, Mr. Jim Meikka has ordained that the WSJ is the only official source, I have no option but to obey the rules and use their data. But from now on I'll go to StockCharts for some form of verification (even though StockCharts almost always shows slightly fewer new lows than the WSJ does).
OK, onto the current status:
Needless to say, with today's hefty pullback there aren't very darned many issues attaining a new 52 week high. At the time of this writing, there are only 23 (about 85 are required). And this may surprise a few people, but there are also only 28 new 52 week lows. StockCharts reports similar (but not identical) numbers so we can be reasonably assured that the WSJ isn't playing games today. So the odds of seeing an HO signal today are very remote indeed... just as I thought before Monday morning's open.
Although I let this particular post go very quiet when there is little to report, rest assured that I'm still monitoring the components of the HO on a daily basis and will report more here as it becomes necessary. For the moment then, it's one of those "Move along folks, nothing to see here." type of days.
But feel free to check in whenever you like. If there is something to report, it will be here when you get here.
Best of success to all. Stay safe!
UPDATED MAR. 5th -
As I pointed out about 10 days ago in this piece, the number of new 52 week lows has been very, very weak considering that the market has been jacked up for something like 50 days straight. Be sure to check out the chart and click on it for a live picture of what's happening. Normally we'd be seeing much higher numbers for new 52 week highs after such a run. For example, just prior to the April, 2010 high the $NYSE was generating an average of about 400 new highs every day with a peak near 650. With 1.5 hours to go in the trading day today, the number of new 52 week highs is currently at a paltry 72 with 85 required by the HO. The number of new 52 week lows has risen sharply over the past few trading days from an average of about 20 to 63 at the moment of this writing. 85 are required.
The bottom line is this... the Hindenburg Omen is rumbling big time and is threatening to issue an 'initial signal'. For those who haven't yet read the piece entitled "So The HO Issues a Signal. What Happens Next?" I highly recommend that you do. I've been urging readers for months now to do that ahead of time. It's very important to really understand what an HO signal means and to be fully cognizant of what we might expect going forward.
Stay tuned. This particular post is going to become quite active after 2 months of silence. Now you know why I keep this particular post quiet most of the time.
At the end of the day the numbers ended up as follows. 85 of each were required:
New 52 week highs - 81
New 52 week lows - 61
Those numbers are often adjusted by a digit or two after hours but they're close enough to paint the picture. So clearly the market internals are shifting from very weak to 'weaker yet'. All I can say is that the market internals are residing in an area where the HO is more or less drooling, and at a time when we've just witnessed almost 50 days of straight 'up' action. It's also an occasion when I saw the HO awaken from a slumber faster than I've ever noticed in the past. Obviously something's wrong. We'll post updates tomorrow for sure.
UPDATED JAN. 10th - Things are starting to get very interesting on the HO front. As many of you know by now, one of the parameters that go into the HO formula is that the 50 day moving average must be pointing higher on the day the HO triggers. And as we all know, when a market reaches a top, sooner or later that 50 day moving average is going to roll over and start moving downward. This obviously is a very bearish development. How ironic is it then, that at a market top, when the 50 day moving average does roll over, it also switches off the HO. The HO cannot issue a signal once the MA has turned lower. That's exactly where we are today.
It's too bad that the HO doesn't issue a signal just before a market top, but by it's very strict nature... it won't. It needs to see very strict and concrete evidence. Therefore it is usually late, just as a 50 day moving average is late. But once the HO
comes back on line probably later this week, watch out. That would mean the 50 day moving average is flickering... a sure sign that the market is at a decision point... perhaps an inflection point. Such conditions within the market create an atmosphere that is absolutely prime for an HO signal. Of course this doesn't necessarily mean that a signal is imminent... not necessarily, since the market action could certainly resolve to the upside. But it's a big fat amber flag to be sure. So please stay tuned! This particular post is always updated when there is something developing. Other than that, this room remains relatively quiet.
Ok, at the moment we're seeing 74 new highs (with about 85 required) but there are just 12 new lows. The number of stocks within striking distance of attaining a new low are more than sufficient though... should the markets suddenly decide to finish the week with a big Friday dump. Maybe some of you will do the same thing? I'm not suggesting that's what's coming, but who'd be surprised? The markets are so wacky, so fragile right now that absolutely anything is possible.
So stay tuned... for some reason my spidey senses are tingling just a bit. On the other hand, perhaps they shouldn't be because I really can see the potential for a rocket shot to close the week as well.
ADDITIONAL UPDATE JAN. 5th - This is actually a pretty interesting day on the HO front. As I mentioned, the HO did flicker off for a short while there and as I also mentioned, it was possible for it to flicker back to life if the NYSE were to bounce. And that's exactly what has happened. The NYSE bounced and the HO is back online. These events actually are not unusual around the time when an HO signal occurs, since any major turning point in a market usually does occur in conjunction with turns in moving averages. Not only is it normal, it's to be expected.
In the meantime, the required number of new 52 week highs has almost been attained thanks in part to the little blast-off that happened off today's low, and yet the number of stocks within 2% of their own new 52 week low has actually risen. The HO is still online and the possibility of getting a signal today still exists, although it seems remote.
UPDATED JAN. 5th - This post will be updated on a regular basis as long as the market is producing prime conditions for a signal. From now on, updates will appear at the top of the post rather than in the comments section.
As I mentioned about a week ago (both here and on the insta at Seeking Alpsh), the HO would be in danger of switching off somewhere between today and Jan. 9th. That possibility was due to an increasing potential for a violation of the rule about the 50 day moving average of the NYSE must be rising. At this very moment, that's exactly what has just happened. The HO just flickered off.
At the close of today, the NYSE must be higher than 7547.63. It has just dropped below that level. So as of this moment, the HO has gone "offline" and is disallowed from issuing a valid signal. It's entirely possible that the NYSE could put in the required bounce today that would be necessary for the HO to remain online. That level is 7547.63. Tomorrow it will be given a bit more breathing room and will come back online provided the NYSE is above 7400.82.
Other than that, the numbers of new highs and new lows are still being ground out and it's too early in the day to get any sense of where they'll end up. There are currently only 9 new 52 week lows and only 51 more issues that are within 2% of putting in a new low of their own. So the odds of seeing a signal today seem rather remote anyway.
The real reason for this update is to demonstrate how false alarms occur. Some analysis are all too trigger-happy to issue a declaration that "The HO has gone off! The HO has gone off" when in fact it was impossible for a issued a signal to be issued. Theoretically, today the number of required new highs and new lows could be generated. But as long as the NYSE is below 7547.63 (today only) there is a strip of masking tape over the mouth of the HO. It cannot issue a signal under these conditions.
Many of you may know by now that for the past 26 months I've been conducting ongoing vigilance over the metrics required for the Hindenburg Omen to issue a signal and reporting it as required to my friends and followers over at Seeking Alpha. By "as required", what I mean is the various occasions when it was making rumbling sounds or conversely, at times when it became broken for weeks on end due to rule violations, and even at times when an hourly basis or less was required... as in, she's about to sound the alarm.
BEFORE WE GO MUCH FURTHER, LET ME MAKE ONE THING PERFECTLY CLEAR. IN SPITE OF NUMEROUS REPORTS THAT THE HO HAS ISSUED SIGNALS IN DECEMBER, SUCH AS IN THIS REPORT, I ASSURE YOU THE REPORTER DOESN'T KNOW HIS SUBJECT. HE'S EITHER USING RULES THAT WERE TOSSED IN THE GARBAGE YEARS AGO OR HE'S GETTING HIS INFORMATION FROM MARIA. REPORTS SUCH AS THESE ARE THE VERY REASON THE DEBUNKERS DECLARE THE HO SIGNALS TO BE OF NO VALUE. THE DEBUNKERS ARE CORRECT, SIGNALS SUCH AS THE ONES IN THE RECENT REPORTS ARE INDEED OF NO VALUE... BECAUSE THEY DIDN'T HAPPEN.
Over time, the list of the closest followers of the HO topic at SA has dwindled as the markets began to embark on an uptrend and all talk of the Hindenburg Omen basically disappeared. But those remaining followers have been very dear
friends of mine for years now and have dropped in to read every report I've ever issued, whether it was just something of passing interest or of the much more serious "warning" variety. They have all been avid students over the past 2years and by now are well educated on the topic. Every one of them is aware of what it takes for the HO to issue a signal, the history of what unfolded in the markets after one was issued, and the changes that have been made by the inventor of this remarkable indicator over the past two years. Changes that compensate for the increased number of ETFs (both the bearish and the bullish) and the increased number of bond funds.
Today we saw the market register what I think qualifies as a relatively close near miss. We saw this phenomenon occur many times in April of 2010 until finally, one week before the flash crash and on the morning of the flash crash, the HO came about as close to issuing a signal as possible... without actually issuing one. No doubt that was due to the much more stringent rules demanded by the inventor, Mr. Jim Meikka. By the old rules, it would have issued the signal on numerous occasions.
I have put in so much time and energy to the HO blog at Seeking Alpha that I don't see any point in bringing it to this new space. The easiest thing for anyone who's interested would be that I simply redirect you to the SA blog where you can follow the proceedings on a daily or hourly basis as conditions warrant.
Before I do that though, I just have to say that it never ceases to give me a chuckle when I see the debunkers come out in full force any time the topic of the HO is brought to the forefront. In fact on the weekend I saw one particularly ignorant individual, an accomplished troll of great reknown, make the following statement: "Is Alberta using the heavily interest rate biased data from the NYSE high/low list? If he is, then his HO indicator is biased by closed in bond funds, utility stocks, preferrereds, and ETF's just like the NYSE A/D data."
That particular question is actually very valid and it pops up every single time the HO is mentioned. In the most recent case though, it was simply a troll doing the one thing he does best. In most normal cases though, it is brought up by those who are simply ignorant (innocently so) of all the rules required for the issuance of a signal and more importantly, the rule changes that were instituted more than two years ago to compensate for a different market. They are stringent indeed. In fact, I have reason to believe that it's possible they are so stringent that they are preventing signals when they should be issued. We actually have absolutely no way of knowing that with any certainty. That being said, we respectfully and loyally abide by the strict rules as dictated by Mr. Meikka, who himself is a very interesting story. For one thing, he is an accomplished rifle marksman. He is also an accomplished inventor. He has also been blind since 1986 when he lost his sight due to an explosion.
|JIM MEIKKA AND ZOEY|
So for those of you who are interested in the Hindenburg Omen, and those of you who lie and say that you aren't, this is a link to the latest entries in the 26 month long series as seen on Seeking Alpha. This is the same link that is also found in the panel on the right side of this page, for those who hadn't noticed it.
Also, I strongly advise readers to get yourselves familiarized with what an HO signal means. It's far better to do it now rather than after the first signal has been issued, just for your own peace of mind. So The HO Issues A Signal. What Happens Next?