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The Hindenburg Omen Issues Rare Sell Signal

By John Del Vecchio and Brad Lamensdorf

The Hindenburg Omen has issued a sell signal. In recent months, the Omen has indicated lower stock prices ahead. Just prior to the COVID smash, the signal was bearish multiple times.


Here’s how the indicator is designed from SentimenTrader.com:

The Hindenburg Omen is a technical warning sign that was created by James Miekka in the 1990s, based on work from Norman Fosback in the 1970s. It monitors conditions that analysts have looked at throughout history as signifying potential weakness underlying the market. For this particular signal, we use three criteria, which likely differ from other sources: 1) The S&P 500 is above its 50-day moving average, 2) Both new 52-week lows and 52-week highs on the NYSE are greater than 2.8% of all advancing and declining issues, and 3) The NYSE McClellan Oscillator is negative. When the signal triggers, it highlights a “split” market, which is unhealthy. Multiple signals in a cluster is a worrying sign. Traditionally, the signal is canceled after 30 days or if the Oscillator turns positive again, though we’ve seen that it can lead to market trouble several months in advance.

To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad.

You may book a call here.


Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.

This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s.  Active Alts  is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader  Past performance is not indicative of future results.

Money for Nothing but the Risks are Not Free

By John Del Vecchio and Brad Lamensdorf

The masses are at it again!

As the market climbs higher, investors are borrowing more and more on margin to pad their gains. 

Greed is in full force.

Take a look at this chart, courtesy of Advisor Perspectives, that shows investor credit balances since 1995.

Negative balances are not yet to new highs, but they are close and surging.

Money for Nothing but the Risks are not Free
Money for Nothing but the Risks are not Free

In the past, there have been peaks in negative balances right before a significant ass-kicking in the market. That is why we watch sentiment so closely.

First, the period of February 2000 shows a peak. Then stocks imploded. Second, a peak formed in June 2007. Then a butt-kicking ensued. Third, the mother of all peaks formed in May of 2018. By Christmas, the markets were a massacre. Lastly, just before COVID hit, negative balances were creeping up again.

So, here we are near new highs in both the markets and margin. The risk is that as investors unwind these positions when they flinch, the market plummets faster and harder.

A swift decline will create significant opportunities to snap up great stocks at low risk. 

We saw this opportunity in early 2020. The Active Alts SentimenTrader Long / Short strategy was positioned conservatively heading into 2020, jumped into stocks near the lows and rode that trend for the rest of the year. 

Want to better position your portfolio for 2021 and beyond? Book a call with Brad to discuss how the Active Alts SentimenTrader indicators can help your performance and manage your risk.

Stock Market Sentiment Indicators Continue to Advise Caution

Stock Market Sentiment Indicators Continue to Advise Caution.  Short-term indicators are no longer oversold, suggesting the possibility of short-term bounces. The real story remains with the intermediate-term indicators. They suggest stock market investors should remain cautious. They see no stock market bottom in sight. This is true particularly in this period of high volatility and global economic and political uncertainty. We should also note that another bad sign for the stock market is that the weekly trading breadth remains very negative and new stock lows outnumbered new highs for the second week.

As for intermediate investor sentiment, The Investors Intelligence Bulls/Bears poll of stock market newsletter writers’ spread between bullish and bearish sentiment barely changed to +31.2 from +31.4% last time (see chart). A spread above 40% calls for increased defensive measures by investors. However, a spread over 30% still means investors should be defensive. Another contrarian warning sign for investors from this poll is that the group of advisors projecting a correction remained heavily in the minority,  barely moving to 33.0% from 32.4%.

Stock Market Sentiment Indicators Continue to Advise Caution
Stock Market Sentiment Indicators Continue to Advise Caution

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