Market Direction and Stock Trends

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Weekend Stock Market Analysis
By Amateur Investors | June 17, 2017

For those that follow Hindenburg Omen Signals another one occurred in late May. The basic criteria are listed below.

1. The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.
2. The smaller of these numbers is greater than or equal to 2.2% of the total issues traded.
3. The NYSE 10 Week Moving Average is rising.
4. The McClellan Oscillator is negative on the same day.
5. New 52 Week Highs cannot be more than twice the new 52 Week Lows (New 52 Week Lows can be more than double new 52 Week Highs).

To reduce the number of signals I also include the following to trigger a confirmed Hindenburg Omen.

6. Two Signals must occur within 30 Trading Days.
7. The Inflation Adjusted S&P 500 must be at an all time High or at the top of its Long Term Channel.

Applying all of the above criteria yields the following confirmed Hindenburg Omen Signals (points A) the last 50 years. All of the prior events were followed by a correction (points A to B)



Next let's take a closer look at these previous signals starting in the 1960's using charts that aren't Inflation Adjusted. There were two HO Signals in May and December of 1965 (points A and C). The first signal in May was followed by a brief drop (points A to B). This was then followed by a new all time high (points B to C). After peaking in early 1966 a 22% correction followed.



The next HO Signal was in December of 1969 (point A) which was followed by a 36% correction.



Meanwhile the next HO Signal was in December of 1999 (point A). This was followed by a top 3 months later (point B) and an eventual 50% correction.



The next group of Signals occurred in July and October of 2007 (points A an C). There was a brief drop with the first HO Signal (points A to B) followed by a slightly higher High three months later (points B to C). This was then followed by a 58% correction.



Meanwhile the last HO Signals occurred in December of 2014 and June of 2015 (points A and C). After the December Signal the S&P 500 did briefly drop (points A to B), however, this was eventually followed by higher highs into May (points B to C). The June HO Signal was followed by a 15% correction.



Currently we have seen two Signals in the past 6 months. The first one was in December (point A) while the second occurred in May (point B). So far the market hasn't gone through a decent correction. However, based on prior events, we should be alert for one going forward.



Even if the correction was like that of of late 2015 into early 2016, which was a 15% drop, that would take the S&P 500 back to its longer term upward trend line which is around the 2100 level.



http://www.amateur-investors.com/AII_Weekend_AnalysisJune_17_17.htm

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