Third Hindenburg Omen despite Friday’s rally

Posted on 28 August 2010 with 5 comments from readers

US stocks rallied on Friday thanks to weasel words from Fed chairman Ben Bernanke after a dismal week with a dip below 10,000 on the Dow. The S&P 500 ended lower for the third week in a row. Tuesday saw the third Hindenburg Omen, the classic chart signal of an impending crash based on a complex analysis of trading movements.

You might ignore one Hindenburg warning but three? ArabianMoney announced the first on August 12th (click here). But we prefer to stick to fundamental analysis rather than look for zepplins crashing in the charts.

Here the picture is surely just as clear. The stock market continues to price in some kind of recovery while the economic indicators increasingly point to a double dip recession.

Remember the summer of 2008 and the way economists upped the ‘possibility’ of a recession to 30 per cent. They are at it again, apart from old Albert Edwards at Societe Generale whose bearish vision makes Marc Faber look an optimist.

Mr Bernanke’s touching commitment to save the US economy has also been with us for a long time, and it has not worked to date, although things might have been very much worse.

Bond yields are at record lows. Money is shifting into gold and silver with gold bullion purchases up 40 per cent this year. Share prices rose on thinner and thinner volumes this summer. The day of reckoning is coming. Indeed, the Hindenburg Omen suggests it is happening now.

The ArabianMoney investment newsletter continues to recommend a portfolio of short ETFs as a low risk, inexpensive way to participate in this mayhem and make money.