Tuesday, August 13, 2013

Stock Market Crash, Hindenburg Omens, and Retail Sales

“‘There have been multiple occurrences of the Hindenburg Omen in the last several weeks,’ [Art] Cashin, the director of floor operations at UBS, said in his morning note…[He cited the following from SentimenTrader's Jason Goepfert]

‘With the latest market rally, the Omens are flaring up again. There have been 5 Omens triggered out of the past 8 trading sessions (your data may vary—we're using the same sources we've always used for historical data). That's actually the closest-grouped cluster since early November 2007.  It's extremely rare to see as many Omens occurring together as we've seen over the past 50 days. The last time was prior to the bear market in 2007.  The time before that was prior to the bear market in 2000.’” Story and video from CNBC at…

Not since 2000?  2007? Ouch!  Hindenburg Omen is a collection of technical indicators that have usually (but not always) presaged market troubles.

“It has been six years since we last saw a spike in stock buybacks, and it has also been six years since we last saw a market crash.  While some might dismiss that fact as mere coincidence, for Steve Hochberg, chief market analyst at Elliott Wave International, it's proof that another major correction is about to occur.

"It has occurred cycle, over cycle, over cycle. It occurred 1999. It occurred in 2007. And now it's occurring again," Hochberg says of the trend that shows a spate of share repurchases is a warning sign rather than a positive indicator that the people who know the company best see value.”  Story and video from Yahoo Finance at…

Retail sales rose in July for a fourth consecutive month, showing the U.S. economy is breaking free of the effects of higher taxes and federal budget cuts…The 0.2 percent increase followed a 0.6 percent gain in June that was larger than previously reported, according to Commerce Department figures issued today in Washington.” Story at…

A 0.2% increase is not much, but it was in-line with economist’s consensus estimates at Briefing.com.

Tuesday, the S&P was up 0.3% to 1694 (rounded).
VIX was down 4% to 12.31. 

The options boys just don’t believe that there will be a correction!

The 10-day moving average of stocks advancing on the NYSE was down a bit to 47% at the close.  Usually a value below 50% signals additional trouble for the markets.   For the day only 41% of stocks advanced!

New-lows of 187 outpaced the new-highs of 130 today leaving the spread at -57 with the 10-day change in spread heading down.

Today’s reading of Internals is negative on the market and I was surprised to see them significantly down given that the S&P 500 was up.  This suggests tomorrow (Wednesday) will be a downer.

Tuesday, the overall NTSM analysis was HOLD at the close. 

Indicators follow:
VIX is signaling “all clear” and is quite positive.
PRICE is positive.
SENTIMENT remains negative.
VOLUME is stuck in neutral.

Unless the indicators come to more agreement, the NTSM will remain HOLD.

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!) 

I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.