Saturday, August 21, 2010

Hindenburg Omen / Emini Futures Trading

JAMES MIEKKA, A BLIND ORACLE credited as the author of the Hindenburg Omen, a predictor of stock-market crashes that has been getting a lot of buzz, sold his stock positions last week. 

Miekka, 50, who lives in Homosassa Fl. much of the year, publishes the stock market newsletter Sudbury Bull & Bear Report from St. Petersburg and, in his personal moments, is an accomplished inventor and rifle marksman. Did we mention Miekka is also blind? And his suddenly pertinent investment indicator is now predicting a market meltdown in latter September.

The Omen was triggered Aug. 12, when new 52-week highs and lows exceeded 2.5% of issues traded on the New York Stock Exchange, the 50-day moving average rose and three other factors confirmed a confused market. It happened again on Friday, he says.

Longs may be forgiven for sweating their long positions over the weekend: not only did we just have a second, and far more solid Hindenburg Omen sighting Friday with 82 new highs, and 94 new lows, but today is the day when Iran launches its nuclear reactor, and everyone will be jumpy regarding any news out of the middle east. As for the H.O., the more validations we receive, the greater the confusion in the market, and the greater the possibility for a crash.

A quick refresher: One of the main criteria for the Hindenburg Omen is a negative reading in something called the McClellan Oscillator, which tracks the difference between the number of stocks moving higher vs. those moving lower. If the McClellan Oscillator stays positive, there's 
no Hindenburg Omen. 

Market experts suggest a grain-of-salt approach when interpreting the Hindenburg Omen. It's merely a sign that conditions might be right for a stock-market swoon, they say; it's not a predictor of such an event. As Tim McClellan of the McClellan Market Report wrote this week, "It's a warning sign and an investor should never use one piece of information." 

For Retirement Accounts and 401K's the option is to cinch up your truss and ride it out, or just go to cash like Jim Miekka. For short term Futures Traders it's a bit of a different story. From a historical perspective you may be about to witness a rare and extremely volatile period in the markets. No matter which way the river flows, volatility equals profits for those on the right side of the trade.

As an American who wishes nothing but the very best for our country, our economy, and yes even our President, I pray the Hindenburg does not ignite. However, if it does, rest assured our daily guests will be standing by to help you make the best of a very bad situation.

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