Friday, May 31, 2013

Hindenburg Omen Goes Off Again

The Hindenburg Omen has issued a signal for the second time in the past 6 weeks, having issued a signal on April 15th.  Prior to that the last signal it issued was in August of 2010.  According to the rules set forth by the HO's creator, Jim Meikka, the market would need to generate a second and 'confirming' signal within the next 36 days.  Nonetheless, we had better be aware that the HO is telling us that the markets are currently on very shaky ground.

In the April 15th event, the markets had put in a short term peak just two days earlier with the S&P registering a high of 1597.  As we can all see in retrospect, the HO had actually gone off in what turned out to just be the middle of a massive 4-day decline which sent the $SPX all the way down to 1536, a decline of 3.76%.  Hardly the disaster legends are made of.

[RANT ALERT]:  But then again, I don't think that any time in the history of the entire solar system has there been such concerted effort by the demented central bankers of the world to prop up the equities markets as a side effect of trying to create inflation in the face of the greatest global deflationary pressures that ever existed.  Deflationary pressures of the bankers' own creation... deflationary pressures that are the natural ultimate outcome of decades of expansionary policies that no longer work.  The bankers have literally put the entire world into debt (to the bankers, and that's the most dangerous aspect) to such an extent that by now the world is simply saturated in debt, debt that can barely be repaid with interest rates at the lowest levels of all time.  Rates that the bankers are determined to hold down near zero no matter what it takes, thinking they can be successful at holding rates down by destroying currencies, which by natural logic would normally create inflation which in turn destroys the bond markets.  A classic case of the snake eating its own tail.  The solution to this dilemma appears to be that the bankers themselves are now buying up all the new bond issuance since there is nobody left who is willing to accept them at such low rates in the face of such efforts to destroy those same bonds.  Again, the snake eating its own tail.

I'm not sure what 'you' think of the bankers' policies but to my way of thinking there can be only one of two distinctly different outcomes, one being far worse than the other.  Either the bankers lose control and the entire global banking system collapses into a smouldering heap (believe it or not that's the good outcome), OR the bankers end up being successful, owning the vast majority of all sovereign debt in existence, owning the majority of the global stock markets, owning the majority of all global real estate debt and owning all of the student loan debt.  In the latter horrifically frightening case... they essentially own all of mankind.  The sickest aspect of it all is that the day would arrive when the rate of interest no longer matters, because once the entire world is begging for mercy, the bankers could forgive all debt in return for deed to basically everything including mankind itself.  No more debt... and the bankers own the entire planet and all its inhabitants.  By the way, that has been the goal of the dark overlords for centuries.  And in case you haven't spotted it by now, that's the bad outcome.

But in the name of hope let's briefly discuss what's going on with some of the countries that have been in the news a lot over the past couple of years.  Some of them reached their end game a couple of years ago, Greece, Ireland, Iceland to name a few.  Of those three countries, Greece and Ireland solved their economic problems caused by too much debt by bending over and allowing the ECB to ram billions more worth of loans up their tiny arses.  Not exactly the best way to get out of debt... by borrowing more.  A six year old child understands that.  The Icelanders on the other hand... apparently nobody can goose a Viking.  And the Icelanders did what 'real' men do... they kicked the invading rapists square in the beanbag like every other European country should do, and started to rebuild their village from the ground up.  Today Iceland is already back on their financial feet and have one of the best performing economies in all of Europe.

On a much, much bigger scale, according to Kyle Bass Japan has also reached the end of the road.  In this great 20 minute interview with Bloomberg, Mr. Bass spells out the Japanese situation with the typical humility and honesty he is well known for.  As per his forecast, we can already see the Japanese bond market starting to unravel, and as difficult as it is to accept... that's the good outcome. [END OF RANT ALERT]

Records of what happened in the markets following past Hindenburg Omen signals show that a decline of at least 2%-5% will occur 92% of the time, with more severe pullbacks being less likely.  For example, of all the HO signals since it first came into being, a larger decline of 8%-10% was recorded more often than not... 54% of the time.  So as it turned out, the recent signal of April 15th was followed by one of the smaller market declines, not surprising given the current mindset of the ECB, FED and BoJ.  But let's not let our guard down because regardless of the fact that bankers have pretty much ruined every market on the planet, the NYSE is now at a degree of polarization that no matter how we slice it, is very revealing.  The markets are on very thin ice.

So we simply remain mindful of what the odds are.  The stats below are reprinted from the April 15th article which accompanied the HO signal at that time:

Major Crash - 27% probability
Selling panic of at least 10-15% - 39% probability
Sharp decline of at least 8-10% - 54% probability
Meaningful decline of at least 5-8% - 77% probability
Mild decline of at least 2-5% - 92% probability
The HO signal is an outright miss - 7.7% probability (one out of 13 times)

Wishing all of you the very best...

Thursday, May 23, 2013

Hindenberg Omen Beginning to Hum Again

This will just be a short post to alert my friends and followers to the fact that the market is now in a range where the HO is beginning to sit up and take notice.  Yesterday, despite the markets around the world taking a pretty hefty dump, there were still over 400 new 52 week highs attained on the NYSE, so the HO wasn't even interested yesterday.

Today it's a different story.  At the present moment, with an hour to go in the trading day, there have been 33 new highs and 36 new lows recorded.  The minimum for each is 85, so at present there is little likelihood the HO will issue a signal today either.

One important factor is this... the most recent HO event occurred on April 15th.  In order for a second and confirming signal to be accepted, it must happen within 36 days of the first.  Today is 38 days since the last signal so technically we are starting all over again.  The next signal will be recorded as another "initial" signal.  And if some of the better known market technicians such as Walter Murphy are correct, the market is currently in a 4th wave correction off the April low, which of course implies higher prices to come.  If that's the way things turn out, then the HO, which is working perfectly well, is more than likely in sync with those opinions.

But stay tuned... we're on the case and will report the next HO event when it occurs.