Tuesday, June 4, 2013

Hindenburg Omen Now Official - Second Signal In 4 Days

UPDATED JUNE 19, 2013  - The Hindenburg Omen went off again today but as was the case with the recent signal on June 10th and the near miss of June 13th (below), it is yet another redundant signal since we already had a confirmed HO event 15 days ago on June 4th.  When clusters of HO signals like these begin to develop the message is more than clear... although the market is bouncing, although the VIX and VXX are showing ridiculous degrees of complacency, the markets continue to show serious degrees of polarity in that there are darned near as many stocks making new 52 week lows as there are making new highs.  How could anyone possibly have faith that the markets are going to continue to head higher from here even in the face of seemingly endless floods of liquidity courtesy of the Fed?  When the Hindenburg Omen goes off in clusters of alarms, it does so for a reason.

UPDATED JUNE 13, 2013  - The Hindenburg Omen came very close to going off again today but again, as was the case with the June 10th signal (below), it would have been considered as just another redundant red flag since we already had a confirmed HO event 9 days ago on June 4th.

UPDATED JUNE 10, 2013 - The Hindenburg Omen went off again today but it is a redundant signal since we already had a confirmed HO event 6 days ago on June 4th.  Nonetheless, and this is definitely worth noting, although the market has put in a bounce of sorts nothing has changed internally.  The polarity on the NYSE that the HO is concerned about is still there.

....................Original Article Follows ....................
According to the WSJ, the official source for data regarding new 52 week highs and lows on the NYSE, with 10 minutes remaining in the trading day the final piece of the puzzle was put in place when the Hindenburg Omen issued its second signal in four days.  And with that we now have an official Hindenburg Omen event, the first since August of 2010.

As all my followers know by now, in order for an official Hindenburg Omen signal to go into the history books the HO must issue two signals within 30 trading days.  One prominent analyst declares 36 days but is ambiguous about whether that is calendar days or trading days.  This has caused some confusion regarding that rule, so here it is according to the inventor of the HO, Mr. Jim Meikka:  The rule is 30 trading days.

Therefore, last Friday's signal occurred too late to be considered as the second and confirming signal for the April 15th sighting.  With today's signal, the second in only 4 calendar days, that entire discussion is now a moot point. We can confirm that the Hindenburg Omen has just issued its first "official event" since August 2010.  There could very well be more occurrences of the HO signal tomorrow or next week or the week after that, but now that the second signal has been issued today any further alerts will be considered redundant.  They are not required and they are not taken into consideration.  All they would accomplish would be to reconfirm that the market remains very polarized.  In fact, if a serious decline were to get underway the equities markets should enter into a state where there is no more polarization because the majority of the horses will be pulling the stock wagon downhill.  Therefore any further HO signals are not only irrelevant, they are likely to stop occurring should the markets decide to head south with some authority.

As well, and this is a ruling factor, if the NYSE begins to fall from here the 50 day moving average on the NYSE will soon be turning downward which would effectively render the Hindenburg Omen incapable of issuing any further signals.  Because of the 50 day MA rule, there is actually a fairly small window of opportunity within which the HO can issue its alerts and once the MA rolls lower that window is closed.  This has always been one of the primary reasons the Hindenburg Omen goes off so seldom.  It's also the primary cause of erroneous claims by uninformed analysts that the HO had gone off when in fact it had not (because the moving average had rolled over which to the HO is like unplugging your TV set from the wall).  And by extension, it's the primary reason that the HO gets a bad name in the press, one that it absolutely does not deserve.  In fact, and you have no idea how much this irks me, feel free to click this link to visit my last report on the HO and see for yourself.  One commenter asked the damning question "How many times has this thing failed over the past 4 years?".  And the answer of course is "none".  For god's sake, it has only gone off once in the past 4 years (meaning a 'confirmed' event).

Click here for a link to the live and updating chart.

By now most of my regular followers have probably read the short article entitled "So The HO Issues A Signal.  What Happens Next?"  If you haven't read it yet, by all means feel free to hit the link and do so now.  For convenience sake, the record of what occurred in the markets following all of the previous Hindenburg Omen signals are listed below.  This data is supplied by Dr. Robert McHugh who has also compiled an excellent list of what transpired after every HO event in the past.  You can find that data here:

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)

There's not much else to report regarding the HO, nor would I dare make any predictions about what comes next.  All we know with certainty is that the Fed has proven to be very powerful in not only saving the markets from the decline that should have kept going right on through the March 2009 low, but in driving the markets higher from there by a mind blowing 153.4% (S&P 500).  In other words, the Fed has driven the stock markets up at the rate of 24.56% per year (compounded) for 51 consecutive months now and claims this meteoric rise is due to "improving economic conditions".  Give me a break! 

To say that the recent lofty heights of equities markets around the world are way out of line and totally artificial would be the understatement of this century.  Therefore, to expect that the markets will put in a reasonably mild correction of only 3 to 5% is probably a bit on the optimistic side.  Nonetheless, a minor decline is entirely possible, at least as revealed in the HO's record book.  And in light of the obvious intentions of the meddling central banks of the world, a minor decline is possible.

To put a positive spin on the possibilities that lie ahead for the global stock markets, the record clearly shows that there is a 73% chance that a major life changing stock market event is not going to occur.  And looking at the bright side, there's a 50% chance that the decline will be no greater than 10%.  As Jim Meikka himself said "The Hindenburg Omen is poorly named."  It was not Mr. Meikka who gave this amazing indicator that title, it was his predecessor Kennedy Gammage who had been working on a similar indicator using the McClellan Oscillator as one of it's primary components.  To quote Tom McClellan:

"The ominous sounding name of this signal comes from the late Kennedy Gammage, who passed away Jan. 3, 2006, just a few months after he retired from writing The Richland Report newsletter.  Ken was one of the great proponents of the McClellan Oscillator and Summation Index, and was a big reason why they came to be so well known.  The McClellan Oscillator being positive or negative is one of the criteria for a Hindenburg Omen, so it was probably out of working with that indicator that Miekka came into contact with Ken Gammage.  I suspect that the idea for the name "Hindenburg" was related to a similar signal using NH and NL called the "Titanic Syndrome" which was developed by the late Bill Ohama."

So there you have it my friends.  We should probably expect just about anything now, but it wouldn't hurt that all of us think positively and keep our fingers crossed for the "not greater than 10%" theme. Our chances are 50/50.

Wishing all of you the very best


  1. You're welcome. BTW, I've enjoyed your contributions over at the sick house.

  2. Arnie (from pretzel forum)June 4, 2013 at 5:17 PM

    Thanks for the great post. Am around 10% decline to ~1540 +/- 10 should be in the cards IMHO! As long as it stays above 1480 the FED uptrend remains in tact. Below that and the 27% crash probability comes into consideration!

  3. Hi Arnie. How have you been? Yeah, I look at the daily chart for the S&P and I could sure make a case for another leg higher from the perspective of EWT. Keep in mind that my record for correct calls when it comes to EWT is running somewhere around 7%. So now that a HO signal is in the books we could still see a month of rising markets before it all lets loose. Nothing says that if a market decline is going to happen (and the odds say it will) it has to happen immediately.

    It's nice to see you again buddy. Please... feel free to drop in any time and grab a beer. It's free:

  4. Hi Arnie. How have you been? Yeah, I look at the daily chart for the S&P and I could sure make a case for another leg higher from the perspective of EWT. Keep in mind that my record for correct calls when it comes to EWT is running somewhere around 7%. So now that a HO signal is in the books we could still see a month of rising markets before it all lets loose. Nothing says that if a market decline is going to happen (and the odds say it will) it has to happen immediately.

    It's nice to see you again buddy. Please... feel free to drop in any time and grab a beer. It's free:

  5. Nice update Bro. Happy to see you entering the blogosphere again! I actually don't mind the idea of 5-8% since that could trigger another one soon enough in my humble opinion. 1687 turned out to be a great short and the trades are working well thus far. I hope you are banking some coin during this move.

  6. thanks for the follow up AR. I found it intriguing that even über bear Faver believes the market goes to 1700 and beyond before turning back. It seems that everybody has finally sided with the fed Induced market rise. And we all know what happens when a trade becomes one-sided.

    of course, we haven't seemed to be in a "market" for several years now, so what happens ultimately is really anybody's guess.

  7. Thanks again AR for the update. Much appreciated!

  8. Hola Steenky (no worries, that's a name I occasionally call people I like, lol). My son and I call each other Steenky all the time and we're the best of friends.

    Yup, I'm very cautious about making any sort of forecast based on the fact that we now have an official HO signal. For all we know the bankers might be doing things behind the scenes that none of us are even aware of (I'm certain they are). For all we know they have meetings every Monday night with aliens and Bilderberg is just the distraction. It's just so freakin' bizarre that for all we know the S&P is just getting started on its journey toward 3,600.

    Nope, I'm not banking any coin because I walked away from the markets entirely quite some time ago. I don't write any more articles these days, nor do I blog much. I've completely lost interest because I truly enjoy the challenge of trying to predict "markets", not casinos. There are no markets left, there are only crooked gambling houses. I simply do not survive well in a world where logic does not exist. Nobody does. So I've turned my back on all of it until some sort of sanity returns. And that's going to take some evidence that the bankers have lost control, because until they do lose control the mobsters are just going to continue to do what mobsters do.

    In fact the only reason I even publish these articles on the HO is out of respect for my small handful of friends over at Seeking Alpha who have been reading them for 4 years now. I can't just walk away from those people and say nothing when the HO goes off.

    Nice to see ya bud. What the heck is going on over there at your blog. Has Fam walked away from it or something?

  9. My pleasure buddy. Thanks again for dropping in. Just wondering, have you ever heard of 'this' beer?

  10. Thanks AR! I should drop in more often for sure! I'll bookmark your page that will make it easier to remember!! thanks for the beer broh! always good!

  11. Hi AR, great to hear you up & about.

    I remember you answered my HO question recently about timing -the associated decline "should" come within 30 days of the signal? can you confirm if that is part of the whole thing?

    Because I have AUDJPY just making a [4] low on daily now. Still looking for 107.

    So either

    1. AUDJPY has 30 days to make it up there before collapso-rama (I'm aiming for sub 50 after that - so both me and HO on the money)


    2. I'm dead wrong and it all caves in from around here


    3. Me & HO both full of shit.

    Take your pick!

    All ze best Stinky Amigo

  12. Hey AR, good to see you up and aboot.
    Can you remind me re the HO - you said recently any associated decline "should" be within 30 days of the signal.
    Is that correct?
    Because I have AUDJPY making a [4] low today, looking for 107 before crash-o-rama to sub-50.
    So...... It has 30 days do get to 107, so me and HO can both be right?

    Cheers Stinky Amigo

  13. stupid discus-ting

  14. Yes DK, that seems correct. Looking at the link AR provided the rules and outcomes have been summarised as follows. Very nice summary AR. Thanks!

    1. Once an initial signal has been issued, a second signal (the 'confirming signal') must be attained within 36 days [Dr. Robert McHugh]. That confirming signal could happen the next day or the next week.

    2. When the "confirmed HO signal" has been issued it is valid for 30 trading days [Jim Meikka, creator of the HO].

    3. Once an official HO signal has been issued in accordance with the two rules above, the odds of various corrections occurring are as follows, according to the records of Dr. Robert McHugh. These are not predictions nor speculative guesswork. They are a cast in stone record of what has happened in the past:

    To quote Dr. McHugh:

    "If we define a crash as a 15% decline, of the previous 26 confirmed Hindenburg Omen signals, seven (27.0 percent ) were followed by financial system threatening, life-as-we-know-it threatening stock market crashes. Three (11.5 percent) more were followed by stock market selling panics (10% to 14.9% declines). Four more (15.4 percent) resulted in sharp declines (8% to 9.9% drops). Six (23.0 percent) were followed by meaningful declines (5% to 7.9%), four (15.4 percent) saw mild declines (2.0% to 4.9%), and two (7.7 percent) were failures, with subsequent declines of 2.0% or less. Put another way, there is a 27 percent probability that a stock market crash — the big one — will occur after we get a confirmed (more than one in a cluster) Hindenburg Omen. There is a 38.5 percent probability that at least a panic sell-off will occur. There is a 53.9 percent probability that a sharp decline greater than 8.0 % will occur, and there is a 76.9 percent probability that a stock market decline of at least 5 percent will occur. Only one out of roughly 13 times will this signal fail."

    To put that paragraph in an easier form to reference, here's how it breaks down based on past performance:

    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)

  15. Holy Steenky. Before I try to answer your question, here's a rare treat. This is an interview with Jim Meikka from Sunday night (inventor of the HO).

    You have no idea how rewarding I find it to be that he confirms that the only two signals recently were the two that I wrote about. Any an all others were just flat out worng for one reason or another. Even in this article in the WSJ the author takes literary license and says things that are flat out lies... such as "While the Omen foreshadowed significant drops in 1987 and prior to the
    2008 financial crisis, it has proven to be a false alarm more often than
    " That's a flat out lie... the Omen "does not predict" any particular size of a market decline.

    The article goes on to quote Adam Grimes, chief investment officer at Waverly Grimey, who has a vested interest in keeping people invested in the markets at all times. Here's the spin that Grimey puts on it: "“Let’s not mince words on this subject: This is an example of the worst kind of ‘technical analysis’ — a market signal essentially designated for media soundbites,” says Adam Grimes, chief investment officer at Waverly Advisors. “The markets may well decline from this point, but they will not do so because of some cleverly named signal. The Hindenburg Omen, we have to say, is mostly hot air.”

    That statement is just so incredibly misleading... nobody says the market will drop "because of" the HO signal. Nobody ever said that. All the HO is revealing is situations where the market is so polarized that even assholes such as Grimes can't keep talking it up.

    Ok, to your question... I can't remember if we were talking about the time limit for the second signal or about how much time we have before the market "had better drop or else the signal is dead." I can't confirm that latter time limit but as I recall I read recently where somebody said 40 days. I'll try to Google for that. But unless it came from the mouth of Meikka himself I wouldn't give it one iota of consideration. One thing I know for sure is that when the HO signal goes off it does not mean that a collapse has to happen immediately. I do believe it's 40 days though because that number does ring a bell. I'll see if I can find that quote.

    The HO is never full of shit though because it does not make any prediction about market behavior. It only issues signals about extremes in market polarity. From there all investors can do is to refer to "what happened in past instances". The HO does not make predictions. It's just like a pressure gauge on a boiler. When that gauge goes into the red the boiler might blow up. It probably will, but there's no guarantee.

  16. Agreed. They haven't made a single improvement in the past 4 years that wasn't a step backward. We can't even post images anymore that show up as a thumbnail. They show up full size and blow the page up so freakin' big that it takes two days to load the god damned thing.

  17. Yes, but only outside Australia. Ironically, you can't get it locally. Our local beers are much better than the rubbish we export ;-)

  18. I'm glad to hear you say that. I've only had one Foster's in my life and I didn't like it. :-)

  19. I'm glad to hear you say that. I've only had one Foster's in my life and I didn't like it. :-)

    There's nothing quite like being beside (or on) one of the awesome lakes in British Columbia or at one of the orchards there with a nice cold Kokanee. It's a beer that's only brewed in that province and is synonymous with B.C.

  20. Thanks Amigo

  21. Thanks for the heads-up.
    ...and mucho apologies for almost besmerching the reputation of your beloved HO!

    So...40 days and 40 nights in the wilderness... seems... somewhat familiar....and strangely appropriate, lol.

  22. Love the Steenky thing LOL. Fam is actually off on her voyage to become a bride and then her honeymoon. She won't be back until like the 23rd so we are just having some "bearish" fun while she's away. I am sure this will disgust her when she gets to see the charts. She was busy leading up to the nuptials and losing her patience a little so a well earned and deserved break. I am sure she will be refreshed and ready to rock n roll when she returns.

  23. Lol... let me know if you need more time. If you do I'll edit my reply above :-)

  24. It's summer so normal people have lives and enjoy some fun time. It slows things down a little bit as far as blogging. I haven't had decent weather for more than a week since March so I am stuck a bit. Promised I would watch over things as well so it's all good. A lot of group think right now with the nucleus that is participating so it is working well. Almost becoming as much of a chat as a blog. As traders we all go through the rough spots and feel embarrassed to discuss much until we are back on track. I find it easier to admit my error and plug along. It's much more enjoyable when the topic is trading. I think July is going to be fun if it ever gets here. I don't wanna rush summer so will let it take as long as it wants LOL.

  25. Your welcome. Looking forward to the 10th June for the commencement of the Ashes at Trent Bridge:-)

  26. Now that the HO has issued a signal I feel like I can really
    take my eye off that topic and just kick back and relax for a while.
    Yup, I think it's time to do just that:

  27. Noticed at 12:42 pm the dollar had nosedived against the yen.Its recovered slightly..but the question is---will the Nikkei crash tonight(maybe the first index to be affected by the HO).The Nikkei has loved the yen tankiing.Now with a 2% move today,what will that bring in tonights session?Should be interesting to watch.

  28. One or more of the Tyler Durdens posting at ZH doesn't seem to have a grasp of the HO or how it works or what constitutes a signal. I've noticed a couple of posts claiming no HO yet, or that it didn't go off again "today," as if it is supposed to fire every day if things are really bad. Seems there's a lot of misunderstanding or misinformation about it out there.

  29. Yup, the dollar is weakening badly against all currencies, but worst against the Yen. The flipside of that coin is that all the other currencies are strengthening against the dollar especially the Yen. It sure stands to reason that if Abe's plan to crash his currency in order to try to ignite inflation is going to fail just like everything else they've tried over the past 30 years, then the Yen should resume it's pattern of gaining strength just as it has done for the past 30 years. That means "deflation" continues in Japan.

    So by extension, that probably means the Aussie:Yen carry trade is unwinding... another very ominous sign that the appetite for risk is starting to decrease and that deflation is returning world-wide. In a deflationary world it's all a matter of which currency are we talking about? I've long felt that in a deflationary scenario the US dollar and the Yen would both hold up very well because most of the global debt is held in those two currencies. In the long haul that's what I expect to happen.

    As far as the HO is concerned, of course it doesn't "affect" anything... it's just an indicator that goes off when the NYSE reaches a certain high degree of polarity. It's no better at predicting the actual size of any crash on the NYSE than a pressure gauge on a boiler is at predicting the size of the explosion if the boiler blows up. Both of them are simply saying "watch out", something big "is likely" to happen.

    But now that the HO has gone off... and now that the currency carry trade seems to be unwinding, yes we are more likely than not to be seeing some big events "everywhere". And that might include the Nikkei since it's about to undergo pure hell (downside) if the Yen's surge is for real. And I think it is. But I don't think there will be a sudden crash and it's all over in a month. I think that if the deflationary scenario truly unfolds, it will last at least 4 years and maybe as long as a decade.

  30. Nice to see you Papa. Don't be a stranger. You got that right, I've been battling misconceptions about the HO for 4 years now, and all for naught. Very few people understand it. But at least the people who have been reading "my" stuff are getting the real facts.

    The HO has gone off. It's over. It is confirmed. That's it... we forget about it. There could very well be more signals over the next week or two (as long as the 50 day MA on the NYSE is still rising, which won't be much longer if the downside continues), but they are of absolutely no value. They would be redundant. So whoever wrote the article over at ZH that you're referring to wants to stop looking like an uninformed idiot... send him over here for a little straightening out.

    Great to see you buddy.

  31. Cash will be king(if you ve managed to avoid losing all of it)...CNBC had everyone on today saying "buy the dip".Almost unanimous.(Gulp).Yes--I misspoke saying the HO might cause a Nikkei crash first.I think of HO as a symptom of future problems--similar to your physical health.Ignore it at your own risk(etal high blood pressure,diabetes etc).

  32. USDJPY:

    That scary 300 pip move MAY be just the end of iv of extended 5th of Minor 3.
    With a target of 108 still to come.

    Heresy, I know, but it's a valid count.
    And extended 5th waves have a megaphone shape to them according to Neely.
    And this fractal looks a bit like the one in February, only tipped.
    And we stopped at the megaphone, and at the prior (iv) of iii.
    And we are still above i.
    It'll be quite a trick to look like the uptrend is broken only to go on to new highs.
    Like in February.

    One wave left?
    We shall see.

  33. Hey, we might be on the same page, cause I think the USDJPY can get to 108 for the final v wave of extended 5th of Minor 3. Chart up above at AR's. And 30 days might do the trick.

    Don't know if you still think that after today's carnage.

  34. Got it from below. Thanks for tracking this AR. Very helpful.

  35. Good work AR. The carry trade unwinding will be a site to behold for sure.
    And thanks for the HO update, very good to know.
    Sounds like times are going to get interesting around here very soon!
    We already have some sell-offs in emerging market debts and their currencies are collapsing.

    Sounds a bit like 1997 and the Asian Currency Crisis -- all that money in search of high yields got skewered then and again starting to now.

    The yen -- I put a chart up there, I think it may have one wave left before minor 3 is complete. In Minor 4th wave the yen should strengthen for 4-6 months.

    I have no doubt Abe will fail. Already the stock market bubble is popping, their currency crash is affecting bond yields and bonds are selling off, tripped circuit breakers and already intervening in bond trading (was supposed to buy newly issued bonds, not trading ones). Not an auspicious beginning for sure. All that carnage and exports aren't improving much from the trashed yen.

    If Japan loses control of their bonds, and then we could have a case where bond yields explode, and the currency crashes as capital flees Japan like it did those Asian countries in 1997. The bond yields spiking could cause them to lose control of their currency also. That's Kyle Bass' thesis. That's one scenario anyway. You might also be right about the deflation scenario in Japan, both of those two scenarios seem plausible to me. But maybe we've already had deflation scenario for 20 years helping the yen strengthen? Who knows. But it seems like the end game will be massive capital flows out of Japan after the deflation stage completes (whenever that is). Regardless which scenario, it is all about Japan I think. The key to the financial universe for the next two years lies in Japan's yen and JGB's.

    Cheers good sir,

  36. Can I double check something with you or anybody here (AR??). So if the signal registered on Tuesday June 4, that means (absent failure), there is a:

    77% chance that we will within the next 30 trading days go down 5% from that NYSE closing low on June 4, which would mean 77% chance of at least NYSE 8154 by July 3?

    Is that right?

    Thanks in advance.

  37. Posted this below, but was curious for you guy's insight. This probably is an important data point. I am understanding the HO correctly:

    So the signal registered on Tuesday June 4, that means there is a:

    77% chance that we will within the next 30 trading days go down 5% from that NYSE closing low on June 4, which would mean 77% chance of at least NYSE 8154 by July 3?

    Is that right? Only thing that negates it is 30 days from June 4, (price moves do not negate it. Correct?

    Thanks in advance.

  38. What's 40 more days when we've waited 40 months so far, eh?

  39. Hey, the yen could weaken for 20-40 more days in wave 5 of extended 5th of Minor 3. Then it's free to strengthen for 4-6 months in Minor 4. That seems to fit the time frame of the HO "within 40 days" that you mention.

    As DK mentioned to me once, stocks might not crash until the usdjpy tops.

  40. Yep - that's right. Got to do something. Getting done by India 4-0 is one thing but this is England we are talking about. I don't know anything about the guy but if he can bowl your captain Alistair Cook first ball on English turf, just like Warne did to Mike Gatting in 1993, it would be worth it. Nothing that hasn't been done before by the English with Tony Greig or Kevin Pieterson who were both exceptional players that saved the day for England on numerous occasions. Not sure if Pieterson is playing for England this year which would be a major loss. I like watching him though!

  41. That is my interpretation of what is outlined in AR's summary. But 30 trading days from June 4 would make it July 16 unless there is a public holiday I am not taking into account. There are also other alternative moves down as summarised by AR.

  42. looking dodgy, but I have a cunning plan
    check this out


  43. Dr. Robert McHugh probably has the best data set and has done the best research on what happened after 'all of' the past HO events. Here's a link to one of his articles from nearly 5 years ago in which he states...

    "Our research noted that plunges can occur as soon as the next day (which is occurring now), or as far into the future as four months. In either case, the warning is useful. It just means, if you want to play the short side after a confirmed signal, or move out of harms way, you must be prepared to see it happen as soon as the next day, or four months from now, possibly after you forgot about it. About half occurred within 41 days."

    I had recently read that generally speaking we should 'expect' the pullback to occur within 40 days. They didn't say whether that was trading days or calendar days. To be quite honest, I think that at this point we shouldn't hang our hats too much on the fine details here. I think we should be thinking in more general terms, cutting ourselves and the markets a little slack and accept that none of this is really carved in stone. I'd say "generally speaking, there is a 77% chance the NYSE will drop to anywhere between 5%-8% below the close of June 4th. And the odds are that his will happen within about 40 days. Trading days? Not sure. Calendar days? Not sure. I'd say "ballpark"... 40 days.

  44. Not sure dude but I know it's gonna expire long before my birth certificate does. I plan on living another hundred f'kin' years and there's not a god damned thing the gubmint can do about that.

  45. Great quote (and probably the only one) from Graham Gooch re Warnie's 'Gatting Ball'
    " If it had been a cheese roll, there's no way it would've got past him"
    I think Pietersen will be fit. it's Clarke's back that might be the problem. Maybe they'll have to strap him to his horse like El Cid.

  46. I know my reply sounded "wishy washy" SJ but that's not because I don't have the cojones to make a call but I simply have no basis upon which to make one. If I tried to give you a date that I thought the bottom would land on I'd just be totally full of shyte. I wish I could be very specific but man, I'm only human like you... and I just don't know with any certainly. I'm sure you understand... I'm not gonna try to bullshit ya.

  47. I'm seeing overlap where there shouldn't be and support where we shouldn't be (if the market has plans to head lower). From the EW perspective I just can't make a case for a bearish count. But I'm also not very good at EWT although I definitely recognize the difference between an impulse and a corrective. I'm fully convinced that the true wave count we're looking at today will only be correctly labelled sometime in September. As far as I can tell the bankers still haven't lost control and they're still insane. So my general feeling is that in spite of the fact that the HO has gone off there could easily be a new high.

  48. So I'm just gonna kick back and relax, and not even think about it until I see some bankers either behind bars or hanging from street lights.

  49. Interesting! We end up at the same result (5th wave remaining) with different counts. Your [3] and [4] are my i and ii, then I have i,ii,iii,iv,v to get to your [3]. Both result in a megaphone which extended fifths supposedly do to. But yours gives a minimum target of 107 and my min would be 103.6. I do think a fifth wave up gives some more time before equities get to their third wave down. And that trend line on bottom was felt by the yen for sure.

    Anyway, two counts pointing to the same result makes me more confident we're headed up there again. Thanks.

  50. Good observation. Yes, with those bankers in control, it sure is hard to count waves on SPX. I've given up long ago. Although when then DO lose control, it should be easier to count impulsive waves down.

    I think there are things confirming your HO warning tho. Things that will start affecting equities sooner or later.

    1. Emerging markets currencies and debt selling off is huge IMO. That was where money flowed to get yield, and now it's reversing, ever since Ben started warning or hinting to people that QE-ternity would be ending. 2. Yield related stocks are getting hit.

    3. Junk bonds got whacked ... worst few weeks in several years.
    4. And currencies are easier to count, and EURUSD and GBPUSD are both close to a third wave down.
    AUDUSD -- the carry trade darling has fallen from grace. Japan's market bubble popping.

    US Equities are about the only thing that hasn't sold off hard, but they did get started down.

    Maybe it all comes a tumbling down when usdjpy tops out in a few weeks (if it has one wave up remaining).

    It's been an amazing journey.

  51. I'm going camping for a few days.

    I'll keep my eyes open for that bankers indicator! LOL

  52. First identified weakness in the one day series is the first three English batsman. Cook, Bell and Trott don't really go for it. Good for the tests but not the one dayers. More of the conservative Geoffrey Boycott type approach for England that is all too familiar I am afraid:-) Just need to rattle these guys and the nerves will settle in for the middle order collapse. Checking out the OZ bowlers and there is not much in this Edgebaston pitch so the likes of Stark can't move it around. Mitchell Johnson and Shane Watson as the quicks need to bounce these guys around a bit to ruffle their feathers, then fire down a yorker or two:-)
    Eng 1 for 103 after 23 overs with run rate at 4.39 per over. Would want 6+ per over on this pitch IMO. The middle order has no chance to settle in after this length of time so I reckon good chance they go down like dominoes once these plodders slip up and make their way to the pavilion.

  53. Hiya Greg. I do not know much about EW. Answering your question I think we get a rally in aud/usd to touch the wedge then fall apart to 0.85ish.

  54. I had a couple of questions that I answered with the following chart (which also ended up providing me with more than I originally sought . . . as is usually the case with time well spent).

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  56. Great chart HR and I sure appreciate the time you put into that. The problem with Dr. McHugh is that to this date he's still unaware that the rules were changed 3 years ago. So some of those HO events never even happened. I can only speak about the ones since '08. Of the 5 latest vertical lines, only the first one (2008) and the second one (Aug. 2010) happened. There was no signal in late 2011 and I just shook my head in disgust when I saw McHugh call that one. Same with both the signals last year... neither of them happened. According to the old rules the might have but we're using the new rules these days. Well... a few of us are (very few of us).

    Nonetheless, McHugh still has the best records I know of and all the other signals shown on your chart should be correct because any signal prior to the one in 2008 would have been under the original rules and those are the rules McHugh is familiar with. So in summary, of the 5 latest signals on your chart, the 3 latest ones never happened. And it is exactly those type of incorrect calls by analysts who don't quite know what they're doing that give the HO such a bad name. Other than that, most of the other signals did have some downside associated with them, in accordance with the summary that Dr. McHugh provides.

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  58. Thanks AR.

    Nice, related article here from Tom McClellan.

  59. So - "Hindenburg Omen Now Official - Second Signal In 4 Days" - I wοulԁn't have thought it would be so good reading as it has been. Now I must finally go and do some work!

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  60. Thanks man. Yeah, I read that article and should have posted the link myself. Tom McClellan... now there's a guy who knows exactly what the rules of the HO are. And he should, it is his parents' own indicator, the McClellan Oscillator, that is a crucial component of the HO's rules. I spoke with Tom on the phone about the HO rules perhaps a year ago and he confirmed that I have been using the right rules all along. For a while there, with all the false reports by other analysts I had to question whether or not it was me who was out of the loop and that perhaps there had been another rule change that I was unaware of. Tom confirmed that I was right and everybody else was wrong, lol.

    On a side note, I was pleasantly surprised with that conversation with Tom. He's a real good guy and far more opinionated in person that we ever see him get on TV. And of course I suppose that's because he's a smart guy and just sticks to the business of TA when he's on TV and doesn't allow himself to segue into his political stances or his aggravation with the whole freakin' system. But you'd better believe he's aware of it. He knows exactly what's going on and he's just as pissed about it as the rest of us are. On top of that, he's pretty entertaining to talk with... he says things with a little bit more passion that I was expecting. So in that regard he's just like the rest of us human beings who are infuriated with those who think they are gods. In other words, Tom is somewhat humorous although I'm not sure he means to be. He's just entertaining. I like the guy.

  61. A short term bull trap could be setting up in world indices currently rebounding off of last week's lows. It's a little complicated to outline, but the data 'crumb trail' and reasoning start here: http://highrevsopenhouse.blogspot.com/2013/06/double-top-reversals-to-target-and.html#comment-924995390

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  63. excellent work AB!!!

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  65. Three signals make a cluster? ;-)

    Check this out: http://blog.kimblechartingsolutions.com/2013/06/nasdaq-100-fell-80-last-time-this-took-place-different-this-time/

    I think we're going to get a ton of confirmatory material in the coming days and weeks.

    For the record, I think we get one more rally before we get the big one - something along the lines of down into OPEX, then a 'summer rally' and then KYAG.

  66. Wed night...Nikkei is down 5%...dollar is getting hit.Was last week a rehearsal for this week?How low can it go?

  67. I'll take a shot at it. The way I see it is that since it seems pretty much a slam dunk that the Japanese bond market is finished, rates in Japan can go nowhere but up from now on... and probably for years. Nobody is going to lend them any more money, not even their own people. If the bond market does indeed tank, sending rates higher by even as much as only 1%, Japan is going to default no matter how many Yen they print. Any sovereign default in a huge event, but when it happens in the second biggest bond market in the world it is going to be devastatingly deflationary. Not only for Japan but for the entire world.

    The Yen would soar because there would be an extreme demand for investors to get their hands on Yen that are vanishing off the face of the earth due to the collapse of credit. They have two choices, go bankrupt or pay off their debts as best they can and save face. In order to try to stay alive, they have little choice but to try to pay off their debt. And in order to do that, the "must have" Yen. Once the decline in credit is unleashed there will be not stopping it because the Japanese bond market is 6000 times larger (arbitrary big number, lol) than anything the BOJ could handle just by printing more Yen. The exact same path will be taken by the American dollar but I don't think that happens until 'the end' of the deflationary cycle... maybe a couple years down the road.

    But back to the topic... if the Yen does indeed soar, and deflation returns to Japan with a vengeance I think the Nikkei is ultimately headed to its all-time lows if not a lot lower. The Nikk was at 6500 back in 1980. I think it's headed in that direction and might even drop lower than that when all is said and done. Judging by a monthly chart of the Nikkei and looking at how fast declines can happen in that market, I'd guess that the Nikkei could be below 6500 by the end of 2015.

  68. Or they could join the the ECB ...lol or become our 51st state to qualify for future QE and TARP.Weed night?Whats that?(he asked knowingly).I thought that was Friday.

  69. Any theories out there on how our market can disconnect from the Japanese market?Usually the global markets are in lock step with each other and feed off each others moves(especially a 6 percenter.)The dollar has not recovered....is it just anothet token bounce off the 50 day?(which it better do or the correction is on ).
    I have a conspiracy theory that Bernanke is directing the Goldman Sacs of this world to prop up our markets at certain times(like at 50 day MA).Or is this a meager bounce before the big fall(which I think the Nikkei is predicting.In many instances the Nikkei corrects weeks ahead of the U.S. markets).

  70. "No severe correction or market crash has occurred without the presence of the Hindenburg Omen"----a quote worth remembering.

  71. I just came across this chart that John Hussman put together with more restricted criteria.


    Posted as part of this article: http://www.hussman.net/wmc/wmc130610.htm

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  77. Good stuff AR! Right on ... no way around it, japanese yields are going to rise, and probably spike. That is a given. Only question is the timing, of course.

    And this latest yen weakness was probably linked to the yen carry trade unwinding ... and surely the yen carry trade was a huge force greasing the markets the past 6 months as the yen dropped by 35% (in a preditable manner). At first they said hedgies who were long japanese stocks and short the yen were unwinding that pair trade.

    The immediate question is, does another wave up remain before the yen really corrects? Up to 108 perhaps?

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  81. Yeah that's what I think too Greggor. The unwinding of the Yen carry trade (especially with the Aussie) is one hell of a source of dry kindling that will further fuel the natural upward direction of the Yen if deflation takes hold as a result of the hike in rates that seems baked into the cake. The currency carry unwind is extra to the natural path that the Yen would take if deflation resumes. This situation potentially has 'panic' written all over it.

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  96. All on pause while we wait to hear the utterences of the Fed on Wednesday.
    Will they give us details of when they will taper?

    Well, we know not what they will say on Wednesday.
    But we do know that THEY HAVE TO TAPER.
    Just like Japan will be forced to stop the madness ... as a trashed currency causes interest rates to go up, and that causes debt burdens to explode.

    It's just math. They have no other option. They have to taper.
    Because their number one priority is funding the (massive) govt. debt than making assets go up.
    Assets going up hasn't lead to increased spending anyway, so jobs haven't been helped. And won't be helped.

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  99. This is just my humble opinion...but if this rally is going to fizzle and start dropping in a meaningful way---today will be the day---After Bernanke.If he says one wrong sentence,we could have a helluva reversal.

  100. Your humble opinion is welcome anytime. The HO went off late in the day as well, so it appears to agree with you, lol. And now, on Wed. morning, the markets are crumbling. So I think we have to give you credit for starting the current stock market decline :-)

  101. Lol...as they say---even a broken clock is right twice a day...and this ,as I write this,is only a 3% selloff.Key levels to exascerbate future selling would be 1598 S&P...but a crash situation would-- in my opinion-- be triggered below 1500.Good luck to all.People are writing about a possible panic in China and Japan...which would make its way over here.Watch the level of 1500 for sure(if we ever get down there).

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