Stocks Slide On Hindenburg Omen Sighting

While there is little gained in figuring out the vacillations in equity 'markets' from one moment to the next, there appear to be three reasons being discussed for this drop in stocks. First, this is the worst  month for the long bond in absolute price deterioration since Dec 2009 - for managers in balanced portfolios, there will need to be a month-end rebalancing 'into' bonds and out of stocks to ensure the weightings remain with their mandates. Second, the index rebalancing is having some effect on the equity market (though that has been well telegraphed). Third, and perhaps more important to some, based on intraday data so far, the much-discussed Hindenburg Omen has been spotted (as it also was before QE2 was announced to save the world). The last time we were this high in stocks and the Hindenburg was spotted was October 2007...

Bonds worst month since Dec 09 - sparks rebalancing...

and The Hindenburg Omen... (red bars on upper pane)... click for large version...

Comments

[Spastica Rex]

Reality doesn't matter, until it does - clearly.

I'm counting to amuse myself, not to validate some belief.

[NipponMarketBlog]

Monday morning in Japan should be.... interesting.

http://nipponmarketblog.wordpress.com/

[Nue]

What's that old saying History does not repeat but it does ryhme

http://video.cnbc.com/gallery/?play=1&video=3000172404  "Something strange is afoot in the market"

http://www.youtube.com/watch?v=CgWHbpMVQ1U  Hindenburg News reel

" Again she dumps water ballast and  A nervious tension grips those who are watching because this is something unusual"

http://www.youtube.com/watch?v=F54rqDh2mWA ITS BURST INTO FLAMES!

[LooseLee]

Looks like the PD used the large POMO to short the market...

[Esso]

"As God is my witness, I thought turkeys could fly."

http://www.youtube.com/watch?v=lf3mgmEdfwg

[JR]

It’s common knowledge among watchers of the equity markets that the steep climb in stock prices is due to equity purchases because of Fed printing.

Most investors know that true corporate profits and a real economic recovery do not support the stock market climb. And with every passing day investors watch for the correction signs and tell themselves they will be able to get out in time if a crash develops.

So, whether it’s the Hindenburg Omen or it’s “smart” money selling, investors will be following each other to the exits without knowing if this is the “Big One” or not. Ironically, when the Big One does come, the high-frequency traders will be in every desirable position nanoseconds before the average investor. IOW, the theater will be on fire and it will be a long way to the exits.

There is a growing chasm between the middle class and people who have connections to Wall Street's favorite corporations. Main Street is sporting more and more empty store fronts again, in fact they are mushrooming in coastal California, while the malls with their national chains and bank connections continue to monopolize and destroy America’s small businessmen.

Without Main Street support, however, it won’t be long before more and more higher end malls start to implode; in fact, they are probably being subsidized right now to keep operating.

Also, the January tax changes reduced mortgage interest deductions for higher income families which also will weaken demand for new and existing homes, according to Fox News, and, thus, home-connnected retail industries..

According to Peter Morici, economist and professor at the Smith School of Business, University of Maryland, in his article “Mortgage interest, tax changes for 2013, hit the wealthy”:

“Although the MID (mortgage interest deduction) remains intact for now for most Americans who choose to itemize, many high-income taxpayers will see some reduction in the value of their deductions, including the MID. That's because the fiscal cliff bill brings back the 'Pease limitation,' which had expired in 2009. This provision reduces a taxpayer's itemized deductions by 3 percent of the amount his or her AGI exceeds a threshold amount.

“Under the new law, the Pease limitations begin at $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers.”

And they call that “wealthy”?

On the other hand, says Morici, the extension of the Mortgage Forgiveness Debt Relief Act that had been set to expire December 31, 2012, has been extended to the end of 2013. It “allows homeowners facing short sales, reduced loan principals, or foreclosures to avoid paying taxes on any debt still owed to the bank. Otherwise, the debt would have been taxed by the IRS as income.

"In some states, short sales have sold for $100,000 less than what the homeowner owed. Hence, a home seller in the 25 percent tax bracket who completed a short sale would have been faced with a $25,000 tax bill if the extension had expired."

http://mynorthwest.com/800/2181524/Mortgage-interest-tax-changes-for-2013-hit-the-wealthy

[mogul rider]

Uh no JR

it's called capital flight, QE is but a small portion of the problem. Stock are going up because of many factors.

old people seeking return

Mrs Watanabe running like hell

Mrs Leibowitz running from palaestinians

France selling wine bottles

etc etc etc

[robertocarlos]

After 5 years the USA is an extra 7 trillion in debt. At 2% that is 70 billion and the Fed's cut is 4.2 billion a year. Not bad work if you can get it.

[goldenbuddha454]

The market collapse will just mean the Feds will see fit to create a bigger and better solution to which everyone will say "Oh Yay, here comes another stimulus plan!"  The last seven didn't work, but we know this one will.  Seven trillion more in debt didn't fix our problems, but surely an additional 14 trillion more in debt will!  PRint the F-in Dollar/ MOAR.  They won't reset the currencies worldwide until there is a total run on food at the stores due to the price controls they have to impose as a result of hyperinflation.

[mogul rider]

The last hindeberg omen I recall seeing was silver at 49 bucks and gold over 1900.

We just hadn't built the algos for it yet.

we have them now.

Add 7 long term gold investors warning of top,

Add 300 million pumpers pumping and hitting thumbs down

add the 7 people left without it who bounced their rent cheques to their parents for the basement

boom