Ian Woodward's Investing Blog

A heads-up from the e-mail bag!  OK now I am confused.  I just updated my HGSI data base this morning and there is no Hindenburg.  Then I took my notebook that was only updated thru last night and yes, there was a Hindenburg. So….. what is the market implications of a fleeting Hindenburg signal?   Hmmmm, maybe just a short downturn? I could only hope.  At least one Hindenburg does not mean a definitive downturn, but it should tighten up our stomach as it serves notice that not all is well in market land.

                   

Hi Jeffrey:  False Alarm! I’m glad to see you are on your toes, but don’t be confused…so always do an update the next morning is the lesson learned here, especially on an extremely volatile day.  The data feed from Reuters will invariably get updated the next morning.

1. As Paul mentioned last evening the New Highs were 132 and the New Lows were over 80 from my memory.  This morning’s download took the numbers down to 81 to 67, respectively, so no Hindenburg Omen…but close enough to suggest a very unstable market as we well know.  For those who are students at this game, all you need to remember is that both must be above 79, as two of the several items to trigger.  The crafty architects of the Hindenburg Omen had no flies on them (only blue bottles) as they also required the 50-ema to be rising from the previous day while the Mc Osc has a knee jerk down with a negative reading.  All clever stuff, but cannot account for the spurious signals when the NYSE Index rises nearly 200 points one day and then goes down over 250 points the next day. 

2. For those who prefer to be in their foxholes as Type 4 long term buy and hold, the only thing to watch is the New Highs on a daily basis.  I am a broken record on this point, but I keep emphasizing it until it will finally register.  We need New Highs on the NYSE to exceed 150 for at least a first push, and then for several days consistently stay above 100 and New Lows below 50 say before any market rally can turn into a full fledged Bull Market.  As we would expect, the New Lows have behaved themselves since St Paddy’s Day, but all boats have not risen enough to repair the damage done from November to March to give adequate New Highs. 

3. There will be Lone Ranger Hindenburg Omen signals during a long Bull Market Rally, but remember that a single signal is discounted as there must be at least one confirming signal to follow.  The fact that both the New Highs and New Lows have to be above the famous 79 (obviously manufactured to deliver as few back tested situations as possible) is that while there is excessive exuberance by the herd, the professionals are selling…hence both New Highs and New Lows are up.

4. Now we can expect the market to trundle on down and close a few gaps while the Oil speculators play shenanigans again, all of which is getting a trifle tiresome.  If this keeps on it will eventually blow up in our faces with the proverbial hitting the fan as the saying goes, and only then will something be done to get things straightened out.  It is a sad state of affairs but that’s “When Bubbles Collide” as John Mauldin reminds us in his billadoo of today.  By then it will be too late!

Keep your powder dry and may all your trades be winners is the wish of your friend, Ian. Late Breaking News!  I have had two feedbacks in the Comments Section of this note and I thank both readers for indicating that according to the Wall Street Journal Database their records show that the numbers are 95 and 89 for New Highs and New Lows, and that would trigger an Hindenburg Omen on Friday.  As I say in my response: I will refer the differences to our data source and see if we can get any feedback, but I would tend to accept the Wall Street Journal info for now.

The more important point is that we have a very jittery market, and it is certainly time to take cover. At any rate, we are alerted and will keep an eye out for any follow through signals.  Best regards and thanks again, Ian.

This entry was posted on Saturday, June 7th, 2008 at 10:27 am and is filed under HGS Principles, Market Analysis. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.