Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16
Donald Trump on Life Support, May Abandon Election Campaign and War on Republican Party - 15th Oct 16
The Gold Manipulators Not Only Will Be Punished, They Have Been Punished - 15th Oct 16
Black Votes Matter - Is the US on the Verge of Mass Race Riots? - 15th Oct 16
Gold Stocks Screaming Buy - 14th Oct 16
Brace Yourself for the Quadrillion-Dollar Reckoning - 14th Oct 16
The Next Recession Will Blow Out the Budget - 14th Oct 16
John Mauldin: My Infrastructure Plan to Save the US Economy - 14th Oct 16
World War III On The Brink: War Will Continue Until It Triggers Economic Collapse - 14th Oct 16
US T-Bill Rejection At Ports In Progress - 14th Oct 16
These 2 Debt Instruments Pose Peril to Millions of Investors - 14th Oct 16
China’s Rocketing Housing Market Real Estate Bubble - 14th Oct 16
DIY Winter Home Maintenance Money Saving 22 Point Checklist to Get Ready for Winter/Fall - 14th Oct 16
US Stock Market, Big Picture View - 13th Oct 16
Stock Buybacks Main Force Driving Bull Market; Rewards Investors and Starves Innovation - 13th Oct 16
SPX Gapping Down... - 13th Oct 16
Syria - Obama Stepped Back From Brink, Will Hillary? - 13th Oct 16
The Structure and Future of Gold in the Investment and Monetary World - 13th Oct 16
Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - 12th Oct 16
Gold and Crude Oil - General Stock Market Links - 12th Oct 16
Samsung's Galaxy Battery Just The Tip Of The Iceberg - 12th Oct 16
Hillary: Deceit, Debt, Delusions (Part Two) - 12th Oct 16
Gold and Silver Metals Show Strength Relative to the USD Index - 12th Oct 16
Announcing Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 12th Oct 16
Confirmed Stock Market Sell Signals - 11th Oct 16
Hillary Deceit, Debt, Delusions - 11th Oct 16
Trump Support Crashes to New Low of 6.4 on Betfair Odds Betting Market - 11th Oct 16
The World Is Turning Dangerously Insular - 11th Oct 16
An American Tragedy: Trump Won Big - 11th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

Stock Market Internals Are Pre Crash Unhealthy, Sitting on a Precipice

Stock-Markets / Financial Crash Jun 13, 2010 - 07:13 AM GMT

By: Robert_McHugh_PhD


Best Financial Markets Analysis ArticleStocks sit this weekend at the precipice. Conditions are ripe for a waterfall decline. This does not mean there will be a crash starting over the next few weeks, so please do not go out and short the farm. What we can tell you is the risk of one occurring is higher than normal, that conditions that preceded prior stock market crashes exist right here and now.

I believe that short-term we are now in a high probability zone for a stock market crash. Further, I believe this catastrophic Supercycle wave (C) down leg of the Grand Supercycle Degree Bear Market that started in 2007 will see a series of stock market crashes over the next 3 to 5 years. Further, I believe that when all is said and done, the Industrials, the S&P 500, and most major domestic and international stock indices will be near the value zero. This belief is based upon the technical analysis patterns and indicators that we follow, and is not some wild speculative opinion. This is dangerous ground we stand on this weekend.

We have been waiting and watching for a Hindenburg Omen to surface, that would warn of a possible stock market crash. We have not had a stock market crash over the past 25 years without an H.O. However, we noted several months back in these pages that it is going to be very hard to get a Hindenburg Omen until deep into 2010 because prices had risen so far, so fast above a year earlier's lows that it would be nearly impossible to see the requisite number of New 52 Week Lows on the NYSE to appear at the same time we get the requisite number of New Highs. We posited that did not mean a stock market collapse could not occur without an H.O. this time, that this time could be the exception to what we have seen over the past 25 years.

But a fascinating development has arisen that identifies a similar condition in the market that the Hindenburg Omen does, which increases our belief that in fact we could see a stock market crash start and continue over the next several months. The whole point of the Hindenburg Omen, the essence of what it is about, is to identify an unhealthy market, on the brink. I will quote Peter Eliades of in his assessment of why a Hindenburg Omen identifies dangerous stock market conditions: "The rationale behind the indicator is that, under normal conditions, either a substantial number of stocks establish new annual highs or a large number set new lows -- but not both."

When both new highs and new lows are large, "it indicates the market is undergoing a period of extreme divergence -- many stocks establishing new highs and many setting new lows as well. Such divergence is not usually conducive to future rising prices. A healthy market requires some semblance of internal uniformity, and it doesn't matter what direction that uniformity takes. Many new highs and very few lows is obviously bullish, but so is a great many new lows accompanied by few or no new highs. This is the condition that leads to important market bottoms."

Now pay careful attention to Peter's thinking. He is absolutely right. An H.O. is not magic. It is a reasoned indicator that identifies a deeply unhealthy market that is not conducive to future rising prices.

Well, get this: There is another indicator we follow every day which has spelled out the precise market condition as a Hindenburg Omen identifies. That is the number of 90 percent up days and 90 percent down days we have seen over the past seven weeks. Are ready for these stats? Amazing. Since April 16th, 2010, there have been eight 90 percent down days and five 90 percent up days. 90 percent days are panic buying or panic selling days. This is highly unusual market action. And it indicates as Peter says about the H.O., "the market is undergoing a period of extreme divergence . . . And such divergence is not usually conducive to future rising prices. A healthy market requires some semblance of internal uniformity, and it doesn't matter what direction that uniformity takes."

Do you see? The high number of 90 percent up days interspersed over the past seven weeks is botching up the uniformity we would see in a normal corrective downtrend -- which would be a good thing for the market because it means a base building bottom is approaching. But there is not any uniformity to the decline from April 16th. Panic selling followed by panic buying followed by panic selling, etc... In other words, we now have the precise condition necessary for a stock market crash to occur over the next few months. This market has flies on it.

The most the Central Planners can hope for is an orderly decline over a period of weeks or months instead of a couple days of flash crashing. But a couple days of flash crashing where prices drop 2000 points over a few days cannot be ruled out. We believe that by the end of 2010, we would have seen stock prices fall at least 20 percent below where they are this weekend. There will be bounces along the way, but we have entered a period of time where lower lows and lower highs will occur, and that period of time could last several more years, into the 2012 to 2014 time period.

You can read an article on the theory and history of the Hindenburg Omen in our Guest Article section at

There are several other troubling developments at this time: Head & Shoulders tops that started back in November 2009 in the major U.S. market averages are nearing completion with downside targets that require a crash to get there. This weekend, we show in our newsletter to subscribers at something else that is interesting, a possible fractal pattern of the decline from October 2007 through 2009 may be occurring from mid-April, that is a declining wedge with a waterfall conclusion.

Check out our June Specials, good through Sunday, June 6h, 2010, including a fabulous 13 month offering, only $259, a little under $20 a month, or 2 years for only $459 at We added a 3 months for $89 budget friendly deal this week.

If you would like to follow us as we analyze precious metals, mining stocks, and major stock market indices around the globe, you can get a Free 30 day trial subscription by going to and clicking on the Free Trial button at the upper right of the home page. We prepare daily and expanded weekend reports, and also offer mid-day market updates 3 to 4 times a week for our subscribers.

“Jesus said to them, “I am the bread of life; he who comes to Me
   shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
     For this is the will of My Father, that everyone who beholds
             the Son and believes in Him, may have eternal life;
                 and I Myself will raise him up on the last day.”
            John 6: 35, 38, 40

by Robert McHugh, Ph.D.

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

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 2008, Main Line Investors, Inc. All Rights Reserved.

Robert McHugh, Ph.D Archive

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife