Hindenburg Sightings Overtake Elvis Sightings

Just when we thought we had heard the last of the dreaded, but also much maligned, Hindenburg Omen, comes yet another sighting in Wednesday's trading according to expert Robert McHugh (https://www.technicalindicatorindex.com/Default.asp).  In a short email sent out to his mailing list:

"Stocks generated a new confirmed Hindenburg Omen Wednesday, December 15th, an official signal with the second H.O. observation in the past two days. This Omen has appeared before all of the stock market crashes, or panic events, of the past 25 years. All of them. No panic sell-off (greater than 15 percent) occurred over the past 25 years without the presence of a Hindenburg Omen. Another way of looking at it is, without a confirmed Hindenburg Omen, we are pretty safe. But we have an official Hindenburg Omen as of December 15th, 2010, so we are not safe."

A reasonably thorough discussion of the complexities and calculations of the omen were discussed  here: http://markostake.blogspot.com/2010/08/hindenburg-omen-all-over-financial.html.

The Nasdaq is now at a 3 year high while the Dow Jones Industrial Average, Standard & Poor's 500 and Russell 2000 are at clear 2 year highs.  Yet, over the past 3 trading days, NYSE new 52 week lows have been astounding high.  The exact number depends on whether you look at the Wall St. Journal or the Yahoo numbers, but new lows ran 2% to 3% of total issues traded each day.  It would be normal to have 1/10th of those levels!

While we're looking at our second favorite zepplin, why not check the solar calendar?  According to NASA, a partial solar eclipse occurs on January 4, 2011.  The last eclipse, occuring early in the summer was total.

Whether a partial eclipse counts in the scheme of astro-harmonics remains an open question.  The connection between solar eclipses, lunar cycles and stock market crashes was discussed more fully here:  http://markostake.blogspot.com/2010/07/hindenburg-omen-confirmed-or-was-it.html.

So, add to that the horrible sentiment picture as described in these recent "Takes": http://markostake.blogspot.com/2010/12/psychology-of-investing-part-2.html,   and one could pretty reasonably conclude that a helluva bear market is dead ahead.

As to Gold and the Gold Bugs Index (HUI), it really appears that a retracement to the 200 Day Moving Average (DMA) is upon us.  That would be another 10% downside for the metal and about 15% for the precious metal stocks.  Silver, if it should correct to its 200 DMA, would have about 30% exposure.

The prospect of a more significant drop in the precious metals sector is extremely remote in light of rapidly building global inflation pressures.  This pullback, which ought to be quite violent but short to scare everyone, should be viewed as a terrific buying opportunity. 

For now, investors ought to stay as liquid as possible, even though safe places to park money offer no return.  Better no return than a sharply negative return.

Marko's Take