Wall Street's 'Hindenburg Omen': A lot of hot air?

This market is getting hard to game, even for the experts. Photo: unattributed

WASHINGTON, June 4, 2013 — Yesterday, the Wall Street Journal noted that Jim Miekka, “a blind former high school physics teacher and the newsletter writer who devised the Hindenburg Omen — confirmed all the criteria were met on Friday that triggered the indicator. He said he’s still invested in the market, for now, and is waiting for ‘a strong up day this week’ before he gets out of stocks and potentially starts shorting the market.”

Perhaps that day was yesterday when a meandering Wall Street headed in a decidedly upbeat direction, which it seems to be attempting to reverse today, though more than three hours of trading now remain.

The Hindenburg Omen is actually an elaborate combination of timing and numbers that are actually best left to, well, physicists and mathematicians.

If you’re curious, a Wikipedia entry describes the Omen as “a technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, in which the German Zeppelin Hindenburg crashed and burned.” If you want to do the math, check out the rest of the entry.

Like many other perennially popular indicators, the Hindenburg Omen actually works. Sometimes. So it’s tough to say whether we’d better head for our bunkers this week. But things really don’t look all that good.

The current market action has gotten so slippery that we’ve begun to lose interest in trying to outfox it, at least for the short term. Technicals are so bad that this market absolutely has to go down. But the Fed’s constant injections of QE money, which seem to destined only for institutions and not the taxpayers who foot the bill, keep stocks going up even when everyone, including many of the company CEOs themselves, are telling us the current so-called recovery is not really so hot.

The market’s undertone actually continues to deteriorate. After experimenting a bit with the long and short side of things and failing on both, we’ve just been whittling down what few stock positions we have left.

High-yield stocks, which we’ve long favored, are getting brutally pummeled, so we have to dump them, too, regretfully, in order to avoid capital losses. Most of the dividends we’ve been pursuing are in no danger, but you have to get out of the way when the stampede is running in the other direction. 

On other fronts, real estate data provider CoreLogic reported that home prices jumped 12 percent in April from a year earlier, the biggest gain since February 2006.

The government reported that the country’s trade deficit in April was narrower than economists had expected.

General Motors rose 2 percent on news that the company will be added to the S&P 500 index on Thursday, replacing H.J. Heinz Co. The ketchup maker’s acquisition is getting bought by Warren Buffett’s Berkshire Hathaway and the private equity firm 3G Capital. GM was up 58 cents to an even $35.

Dollar General slumped 8 percent, the biggest drop in the S&P 500. The discount-store chain cut its earnings and revenue forecast for the year ahead because it expects sales to slow. Dollar General’s stock dropped $4.06 to $49.48.

Washington area stalwart SAIC dropped 3 percent, or 46 cents, to $14.39. The security and communications technology company posted a 31 percent drop in quarterly earnings late Monday, as government spending cuts crimped SAIC’s revenue.

In the market for U.S. government bonds, the yield on the 10-year note was 2.15 percent, up from 2.12 percent late Monday.

BTW, if you’re interested in history, two videos of the actual Hindenburg disaster follow. The first one is a purportedly remastered version of a famous onsite report of the airship’s crash, with the announcer’s voice restored to the lower range in which he actually was known to have spoken.

The second video is a longer Pathé newsreel report of the same incident, complete with the usual musical background score. Newsreels like these were he way folks got their news coverage back in those pre-TV days. Newsreels, cartoons, and other extras were typically tossed in before the feature film. Now all we get are loud, Dolby Digital previews of coming attractions, most of which end up more interesting than the actual film.

Today’s trades:

No trading recommendations until further notice. At this point, everything is just a guess, and after misleading ourselves for a few days, we don’t want to spread the misery. We’ve made good money in 2013, at least until the last week or so, so perhaps it’s just best to get out of the way for awhile until we can read the tea leaves a little more accurately.

Have a good one.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17

 


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  

 

 

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