Hindenburg Omen Confirmed... Or, Was It?

The Hindenburg Omen (HO) was described in yesterday's blog.  For more on how it works, click here http://markostake.blogspot.com/2010/07/hindenburg-omen-foretells-coming-market.html. 

For the HO to be confirmed, it must happen at least twice in a 36-day window.  Did we get confirmation today?  Well, that's a tough one.  According to Yahoo Finance, there were 102 new highs and 85 new lows out of 3,946 issues traded.  That means that the new highs test was met, but the new lows test came in at 2.155% of issues traded.  The trigger criteria calls for 2.2%.  Are we supposed to round up?

But, the HO is not nearly the only reason to fear a market meltdown.  There are a whole slew of others.  Some are out there, some are not.

A man named Steve Puetz (pronounced "pits") is a student of stock market crashes.  He has concluded that solar eclipses combined with full moons were somehow connected to the timing of market crashes.  He does NOT suggest that full moons close to solar eclipses cause market crashes.  But, his research does demonstrate that a full moon occurring close to a solar eclipse, in particular, seems to affect investor psychology in such a way as to transform investor emotions into panic.

His research found that 8 of the greatest market crashes in history fell within a time period of 6 days before, to 3 days after, a full moon that occurred within 6 weeks of a solar eclipse.  Yes, you read that right!

Could this be random?  Statistically, he found that for all 8 crashes to accidentally fall within the required intervals would be less than one chance in 127,000.

It's important to understand that EVERY solar eclipse must, by definition, occur within six weeks of a full moon, which occurs every 4 weeks.  The combination does NOT mean a waterfall decline will ensue, but it does suggest a timing window, should one occur.

Now, here's where things get verrrrry interesting, as Arte Johnson would say.  In the year 2010, there are only 2 solar eclipses:  One occurred in January, and the only other one will occur on July 11!  The next full moon occurs on July 26th, with one to follow on August 24th.  So, if we combine the research of Robert McHugh with that of Steve Puetz, this would suggest that a crash could occur at anytime!

Don't buy that one?  I don't blame you.  But, there is a lot more.

Dow Theory holds that when the Industrials make a new low confirmed by a new low in either the Transportations or the Utilities, a new bear market has been indicated.  This signal has been given.  Dow Theory does NOT predict crashes, just suggests that the primary direction of the market is down.

Let's not forget the horrific plunge in the nation's money supply.  According to adjusted numbers crunched by John Williams of ShadowStats, inflation-adjusted M3 is declining at an annualized rate of 5.9%, the steepest since the Great Depression.  This drop reflects sharply reduced lending by financial institutions and foresages extreme problems in the banking sector.

According to Williams, whenever real annual M3 growth has turned negative, the economy has followed.  Every time real M3 has contracted, the economy has fallen into recession shortly thereafter, or, as in the case of the 1973 to 1975 recession, where the M3 contraction took place after the recession had started, the existing downturn has intensified.  Double dip, anyone?

Ignore this at your market peril.

Marko's Take