We have just witnessed one of the largest cluster of Hindenburg & Titanic Omens in more than 30 years!
Cluster Funk
November 22 (King World News) – Jason Goepfert at SentimenTrader: “It started last week on the Nasdaq, and over the past several sessions, has morphed into a cluster of technical warning signs. They are now triggering on both the Nasdaq and NYSE. Over the past 7 days, the cluster has been one of the largest in more than 30 years.
As I mentioned the other day, if we focus on one particular data point too much, then we risk getting blindsided by a structural market change or simply a failed signal. That’s why we tend to look at a lot of different things, from a lot of different perspectives, to see what the overall theme is.
So, this will probably be one of the last times we focus on some of the breadth warnings that are popping up. The only reason to bring it up again is that it has branched out from only triggering on the Nasdaq to also now being on the NYSE. Both exchanges are throwing off Hindenburg Omens and Titanic Syndromes.
For the first time since July/August, a Hindenburg Omen triggered on both exchanges on the same day. And over the past 7 sessions, there has been a cluster of both types of warning signs on both exchanges.
On the next page, we can see a simple test of future returns when there was a Hindenburg Omen that triggered on both exchanges on the same day. There is some green in the table, mostly from 1995 and 2017, which were two of the most extraordinary momentum years in history.
Outside of those two remarkable years, it was almost all negative returns over the medium-term.
It hasn’t just been an isolated event, as noted above. Looking at the combined Hindenburg Omen and Titantic Syndrome warning signs on both exchanges, there have been 11 signals in the past 7 sessions. That counts as one of the largest clusters in more than 30 years.
These kinds of clusters were killers of whatever momentum had been generated up to that point. Over a multi-month time frame, it was extremely unusual to see upside momentum persist.
The reason these signals are compelling are that they’ve been “in the wild” for a couple of decades. We’ve used the same parameters, with the same data, since 2001, with no adjustments to try to avoid false signals. It is what it is. And what it is is consistently negative for stocks’ risk/reward profile over the next 2-3 months. This is just one example of why Jason Goepfert’s work is well known across the world. To subscribe or try a free 2 week trial of the internationally acclaimed work from SentimenTrader CLICK HERE.
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