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Aug 23rd, 2010: Hindenburg Omen Observation

Posted by pugsma on August 23, 2010

8:20 am EST:  A lot has been made on the bear blogs and even the main stream media about the Hndenburg Omen  firing 3 times in the past week.  The 1st of the key Omen criteria is that there are greater than 2.2% of the NYSE issues (threshold is 72) making new 52-week highs and 52-week lows on the same day.  Friday 8/20 was a day in which a third Omen fired.  But take a close look at what type of shares are making new 52-week highs on the NYSE.  They are almost entirely made up a fixed income and bond funds.   So this most recent cluster of Omens is associated with people fleeing into fixed imcome and bond funds before the fall of 2010, anticipating a market drop.  This set of Omens is not showing a fractured market in equities, as it’s intended.  It’s show a natural move from stocks to bonds to protect capital.  It’s very possible that if this fixed income and bond trade gets too crowded (i.e. bubble), you will see an unravelling of that trade, that could propel equities much higher.

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