Sunday, December 19, 2010

Hindenburg Omen Confirmed On December 15

The last time that Hindenburg Omen was confirmed was back in August. Back then, Hindenburg Omen happened not once, not twice (confirming the omen), but 4 times. Traders and analysts were being fixated on the big "head and shoulders" pattern on the major stock index, which was about to break down from the neckline.

And what happened in September? The stock market rallied. So much for the Omen as a harbinger of a stock market crash, thought many people.

But Karl Denninger at Market Ticker warns us things may not be the same this time around:

- Bernanke has given no indication he cares about rising bond yields;
- Political risk is extremely high with regard to government overspending and The Fed;
- The speculative indices are at 20+ year highs;
- Low TICK alarms have been much more prevalent than high TICK alarms;
- Several momentum stocks are breaking down severely;
- The Corporate Leverage Index, after, what appeared to be a retracement move, took off bigtime in the third quarter and now stands at a ridiculous 12.

For detailed explanation for each point, follow the link.

I am paying attention, because (1) this time around hardly anyone has mentioned Hindenburg Omen; (2) the stock market indices are near the top, instead of near the breakdown point in August.

But then we have Ben "Bernank". As one of Bernank's justifications for QE2 was the ever-rising stock market to give us the sense of well being. We may find out soon enough which is bigger - Ben's Fed or the market. (I have this feeling that it's the latter, but don't underestimate Ben.)


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