Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019

Stock-Markets / Stock Markets 2018 Sep 15, 2018 - 09:09 AM GMT

By: Troy_Bombardia

Stock-Markets

Our Long Term Risk Model suggests that the U.S. economy & bull market are almost at the point at which “things can’t get much better”, but we’re not completely there yet.


The stock market should be fine throughout the rest of 2018, but we are getting more and more signs that the stock market will make a major top in 2019.

Consumer Confidence

The Confidence Board’s latest Consumer Confidence reading demonstrates that consumers are extremely optimistic right now.

The last time consumers became this confident was in December 1997. The U.S. stock market (S&P 500) began a “big correction” less than 7 months later in July 1998.

This suggests that the U.S. stock market will make a major top in 2019: either a “big correction” or the start of a bear market. The Medium-Long Term Model suggests that the next major top will be a bear market start instead of a “big correction”.

Hindenburg Omen

The Hindenburg Omen is essentially a breadth indicator. It measures diverging breadth during a stock market rally.

Conventional trading wisdom is based on the idea that when the stock market is going up, most stocks should be making 52 week highs together. The Hindenburg Omen notes that a problem is brewing under the rally because A LOT of stocks are making 52 week highs (going up) while A LOT of stocks are making 52 week lows (going down) at the same time. In other words, breadth is diverging.

There’s a Hindenburg Omen for the NYSE and a Hindenburg Omen for the NASDAQ. Over the past 6 trading days, there have been a combined 8 Hindenburg Omen signals (from NYSE and NASDAQ).

This is extremely rare and has only happened 3 times in history:

  1. September 11 2018 (current case)
  2. December 10 2014
  3. December 16 1999
  4. July 6 1990

In all of these 6 historical cases, the S&P 500 began a “big correction” or bear market within the next 6 months.

Here are the cases in detail

December 10 2014

The S&P began a “big correction” 6 months later.

December 16 1999

The S&P made a bull market top 4-10 months later (flat top from March-September 2000)

July 6 1990

The S&P immediately began a “big correction”.

As you can see, this Hindenburg Omen seems like a bearish sign for the stock market. Either a bear market or “big correction” begins within the next 6 months.

However, a part of me wonders how useful the Hindenburg Omen is.

Why are “many stocks” in the NYSE making 52 week highs while “many stocks” make 52 week lows right now?

It’s because the NYSE doesn’t just represent American stocks: there are a lot of foreign listed stocks on the NYSE. Foreign stocks have cratered this year while the U.S. stock market is rallying. Hence, the Hindenburg Omen doesn’t represent diverging breadth in U.S. stocks. It represents the divergence between U.S. stocks and foreign (e.g. emerging market) stocks.

This is also why the NYSE Composite – a composite covering all the commonly traded stocks on the NYSE – has lagged the S&P 500 significantly. 55 of the 100 largest stocks in the NYSE are foreign (non-U.S.) stocks.

So in reality, the Hindenburg Omen isn’t necessarily saying that there’s a big breadth divergence in the U.S. stock market. It’s saying that there’s a big divergence in the NYSE: one component which are U.S. stocks and one component which are foreign stocks.

Conclusion

We’re starting to get more signs (here and here) that the stock market will make a major top in 2019. It’s too early to turn bearish right now, but be careful next year.

Click here for more market studies.

By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Copyright 2018 © Troy Bombardia - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in