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Hindenburg Omen

http://www.amateur-investor.net/Weekend_Market_Analysis_Dec_6_2014.htm

My comments concerning the Hindenburg are fairly simple. It is extremely unusual to have the number of new lows expanding while the number of new highs in the market are dwindling even as the stock market hits new highs. This was happening prior to the sell off in late September and early October. It is happening again. Only 6% New Highs on Friday December 6th.

http://markets.wsj.com/usoverview



Here you will see that the number of New Lows has been above 84 several times even as the number of New Highs has been faltering again. Down to 6% on Friday which is the average number of new highs seen at past major market tops.



The final reading necessary to suggest a valid Hindenburg Omen is in place is a negative reading on the McClellan Oscillator which we have recently seen:



It might be foolish to think that the stock market could sell off during once of the most favorable seasonal periods for the stock on an annual basis. Plus it is true that overbought market often grow even more overbought. Eventually though all markets form a top and finally succumb to enough selling to see enter a bear market. I personally think that we will need to see another set of Hindenburg warnings within the next 30 days at even higher highs.

Next year could get interesting. The stock market is overbought and overvalued. The Schiller P/E ratio shows that the market has rarely been so overvalued



One thing that normally precedes a major market top is an inverted yield curve. We are certainly a long way from inverted at this time but we are moving rapidly in that direction:



RtS