A Necessary Condition For A Stock Market Crash…An Official Hindenburg Omen Is Now In Place

As you probably know, I would not be surprised if the stock market crashes within the September/October 2015 time period, possibly before then. I believe the economic fundamentals are poor and getting worse, fast. The technical landscape is warning markets are in a dangerous place.

Over the past two weeks, the stock market generated an official Hindenburg Omen, with observations on three different days. This means we now have a necessary precondition for a stock market crash on the clock for the next four months, taking us well into October 2015. This Omen has appeared before all of the stock market crashes, or panic events, of the past 30 years except one, except the mini-crash of July/August 2011.  Except for that one crash, no stock market crash (a decline greater than 15 percent) occurred over the past 30 years without the presence of a Hindenburg Omen. Another way of looking at it is, without an official confirmed Hindenburg Omen, we are pretty safe. On the other hand, if we have an official Hindenburg Omen, then a critical set of market conditions necessary for a stock market crash exists. As of June 11th, 2015, we have such a condition in the market, as we have a new official Hindenburg Omen.

All the biggies over the past 30 years with the exception of the July/August 2011 decline were preceded and identified by this signal.  It was on the clock just before the stock market crash of the autumn of 2008. It was present and accounted for a few weeks before the stock market crash of 1987, was there three trading days before the mini crash panic of October 1989, showed up at the start of the 1990 recession, warned about trouble a few weeks prior to the L.T.C.M and Asian crises of 1998, announced that all was not right with the world after Y2K, telling us early 2000 was going to see a precipitous decline. The Hindenburg Omen gave us a three month heads-up on 9/11 (2001), and told us we would see panic selling into an October 2002 low, warned in October 2007 that a multi-month 16 percent plunge was about to start, from the DJIA’s all-time high. And it was on the clock three months before the stock market crash of the autumn 2008 into spring 2009 that wiped out 47.3 percent of the stock market’s value. Our subscribers at www.technicalindicatorindex.com were informed immediately as these signals were generated.

There are many technical indicators and patterns in place at this time warning that a stock market Bear Market is fast approaching. The market has lost a ton of upside momentum, as evidenced by the shrinking difference between average New Highs and New Lows as prices approach this top; the NYSE Cumulative Advance/Decline Line has diverged Bearishly versus stock prices; an Official Hindenburg Omen is on the clock; many of our key indicators we track in our market newsletters have lengthening Bearish divergences with stocks; and a multi-decade Megaphone (Jaws of Death) Top pattern is essentially complete, all signs of a coming top and the start of a major Bear Market. This quiet period stocks have put in over the first half of 2015 will lead to panic selling, we believe before year end 2015.

However, prior to a crash, it is possible that after the stock market tops, the Bear Market could begin with an initial strong decline which would not be a crash, but rather the first downleg of the Bear market, with the crash possibly being the second downleg. For example, in 2007, stocks topped that October, however the crash occurred in September 2008, eleven months later. We think this time the crash won’t wait a year after stocks top, but rather will occur within months or weeks of the top. The Fed should have raised short-term interest rates a long time ago if the economy was any where near as strong as the powers-that-be want us to believe. The Fed knows the truth, they know how precarious this market and economy are, they know how fragile the world economy is, they know how dangerous the derivatives markets are, how overwhelming the unfunded U.S. entitlements are, how mountainous the national debt is, how huge their own balance sheet has grown, they know the geopolitical risks setting up now. So, they continue to leave interest rates at zero. Their problem is, what tools do they have left to counteract the coming collapse? Not much I am afraid. They have spent their bullets. Any more dollar printing could lead to a currency crisis. All they can do is keep short-term interest rates at zero and hope the problems go away. Not going to work. The Fed may not be much help when this thing blows.

When will the stock market top? Right now we are tracking a Rising Bearish Wedge pattern from 2014 that looks to be in its final stages of completion. This pattern would look best with one more rally in the Industrials toward the upper boundary, toward the 18,500ish area. However, that does not have to happen. The final leg of this pattern can truncate, meaning it can finish below the wave {c} top of 18,351 which occurred on May 19^th, 2015, one day after our latest phi mate cycle turn date. This pattern has us on high alert. A top could arrive at any time.

********

When did Noah build the ark? Before it rained. We believe it is now time to make sure our arks are built and can float. We can help you at www.technicalindicatorindex.com with our daily and weekend market updates, or conservative portfolio model, and Platinum educational Trading program.  

If you want to track the technical picture for our economy, the stock market and Gold, we can offer you a free 30 day trial subscription to our market forecasting service at www.technicalindicatorindex.com  Simply click on the Free Trial button at the upper right of our website home page. We cover stock markets, economic events, and Gold daily and have Buy / Sell signals we track for stocks, Gold and precious metals. We also offer a Platinum Trading service. Email us at [email protected] for information on that program.

Do not be satisfied hearing what the market did; learn how to predict what the market is going to do. Join us at www.technicalindicatorindex.com as we study the language of the markets. Markets tell where they are headed. Technical Analysis is the science where we learn and apply the language of the markets. We are currently offering a FREE 30 Day Trial Subscription. Simply go to www.technicalindicatorindex.com and click on the Free Trial button at the upper right of the home page. If you would like to follow us as we analyze precious metals, mining stocks, and major stock market indices around the globe, We prepare daily and expanded weekend reports, and also offer mid-day market updates 2 to 3 times a week for our subscribers. 

We cover a host of indicators and patterns, and present charts for most major markets in our International and U.S. Market reports. 

Dr. McHugh’s book, “The Coming Economic Ice Age, Five Steps to Survive and Prosper,” is available at amazon.com at http://tinyurl.com/lypv47v

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com.  The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only.  Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice.  Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision.  Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment.  Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2015, Main Line Investors, Inc. All Rights Reserved.