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Hindenburg Omen confirmed as equities slump, buy short ETFs

Posted on 12 August 2010 with 5 comments from readers

The complex chart indicator known as a Hindenburg Omen occurred yesterday for the first time since the market lows of March 2009. This is a major chart indicator suggesting a market crash is imminent.

However, a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down, although every Wall Street Crash  since 1985 has been preceded by a Hindenburg Omen.  If nothing else traders on Wall Street will sit up and pay attention to this key indicator.

Big sell-off

Yesterday stock markets around the world had one of their worst days this year with the Dow Jones closing 2.5 per cent lower and the Nasdaq down three per cent. It was a great day for short ETFs which deliver the reverse of market performance.

For example, the FAZ financial x3 bear ETF was up 10 per cent. The short portfolio recommended by the ArabianMoney investment newsletter performed well (subscribe to the newsletter from this website for more information on short ETFs).

How much of the gains that the stock market has made since the low of March 2009 will be given up is hotly debated among analysts. There is no consensus view. Some still see the market higher by the end of the year following a sell off into the autumn.

Arch bear Dr Marc Faber told an audience in Abu Dhabi last week that he thought a 950 low on the S&P 500 was possible by the end of October. This seemed surprisingly optimistic from such a pessimistic commentator but he has faith in intervention by the Fed if the market decline accelerates.

Deflationists

The hard core deflationists like Bob Prechter and Harry Dent have been analyzed many times on this site. They point to an implosion of stock markets with the Dow dropping to around 1,000 points.

That does seem a little hard to swallow. But this does not seem a time to be invested in stock markets. Indeed, the best option is almost certainly the short ETFs for the short-term. Then a smart investor would be well positioned to go long again in the late autumn.

The nice thing about short ETFs is not just that you make money in a falling market but that you are then feeling positive and rich when the market is at the bottom, and can score again by buying cheaply.

Those who dismissed astrologer Arch Crawford and his warnings of a market crash this month might want to read this article again (click here).

Posted on 12 August 2010 Categories: Banking & Finance, Bond Markets, Gold & Silver, Hedge Funds, US Stocks

5 Comments posted by readers:

Comment by Bill Simpson in Slidell, LA. - 12 August 2010

For what it’s worth, Goldman Sachs just set a target price of $1,300 an ounce for gold within a few months. Source : CNBC’s ‘Fast Money’. (I think?)
John Chambers, CEO of Cisco Systems, said he sees evidence of a slowdown.
The Nikkei keeps falling for a few more days, like it has been lately, and a black swan the size of ‘Rodan’ might emerge from the Far East to feast on the markets. The fall from 35,000 to 9,100 must have been tough. What is that, about a 74% drop? I forgot how to do the math. Imagine having a retirement plan made up of that. Your money would disappear faster than you could put it in! I’ll bet they wished they had invested in gold.

Comment by emma - 12 August 2010

If gold goes up then the economy goes down. OH OH!!!

I dont think there is an economic recovery coming. have a look at the guy who predicted the 2008 crash. He has been spot on with all this and it is very scary!!!! video => http://www.youtube.com/watch?v=gn6kS4l2yFM

Comment by obewon - 13 August 2010

@emma: the author of that info in the YouTube video is right-on-target. In the long run, the only “sure bet” as an investment is physical gold. The “paper” gold ETFs are just another fraudulent scheme.

For the Record:
1. The “worth” of almost all western “paper” currencies (e.g. the USD) has deteriorated by over 95% since 1913 (the date when the FED was unlawfully created!) when compared to gold. For the USD, I believe the deterioration is approx. 98% to 99%.
2. The above statistic is very telling. Even more telling is the USD’s deterioration since 2000. Its worth has deteriorated by approx. 37% (it may be 36% or 36.5% . . . like Bill Simpson above, I did the math several months ago!). To me, this is shocking, and yet the standard of living in the US over the last 9 or 10 years doesn’t seem to have deteriorated much.

Looking ahead, we intuitively know that the extremely large US government deficits and continued wild spending, given the US FED’s Debt based Monetary System & currency debasement (via continued purchases of US Treasury bonds) will only get worse.

Much worse . . .

Got Gold?

Comment by Philcu - 15 August 2010

For local readers, there is a new option for buying gold:

http://www.emiratesnbd.com/personalBanking/GoldCertificates.cfm

Ed Note: Yes actually this scheme has been around for years.

Comment by Andy - 16 August 2010

This is pretty good. Must see..

http://www.metatube.com/en/videos/37911/An-Important-Note-Of-Caution-By-Tony-Robbins/

An important note to remember is that as banks close up consumer credit cards and reduce credit card limits will result in less spending and less spending will kill the economy and growth. Just watch and see.

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