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.
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.|
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)
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.
"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."