Monday, June 10, 2013

Review on the "Hindenburgh Omen"

As of the post on 4th of June which points out about the Hindenburgh Omen, I've pointed out that the US market is heading to a big correction or even a CRASH. But as thing changed rapidly, I will have to go against my comment again just like what I did  to the Nikkei Post.

For those who hasn't read anything about the Hindenburgh Omen, U could take a look on this.

" The Hindenburgh Omen" on US market."

Why do I change my view again?  

Before telling you the reason why, let's see how one of the "Hindenburgh Omen" failed. 

As we can see, the last "Hindenburgh Omen" happen in August of year 2010 and it had failed. The reason behind that the "Hindenburgh Omen" failed was due to the FED had introduced and wanted to implement QE2 which we deem as a catalyst to push the market. Its obvious isn't it? 

As on the past friday , we had see that the statistic being released by the US was 
" The May payrolls increase fell short of 200,000. The Labor Department said today that payrolls rose 175,000 last month, while April’s gain was revised lower to 149,000. The jobless rate rose to 7.6 percent from 7.5 percent as more people entered the workforce." (quoted from bloomberg)

1.) As we can see, the Unemployment rate had rose by 0.1% from 7.5% to 7.6% while this had implies that the FED ain't going to raise their interest rate until unemployment rate falls to 6.5%.
So, we are still far from it and this had bring a knee jerk effect to Dow Jones by rising 1.38% or 208 points to settle at 15248 . The Dow is backat  above 15,000 points which is a level of confident to investors.

2.) Chairman Ben S. Bernanke needs to see four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases, according to Vincent Reinhart, a former director of the Fed’s Division of Monetary Affairs. Roberto Perli, a former researcher in the division, said the central bank would need to see that pace “through the summer.”

“They would see that as confirmation that the economy is on a self-sustaining trajectory and they would thus be confident that they could reduce the pace” of quantitative easing, said Perli, a partner at Cornerstone Macro LP in Washington.

The figure helps provide clarity as investors seek to determine when the Fed will start to pare back the $85 billion in monthly bond purchases that kept borrowing costs low and fueled a stock-market rally. Yields on 10-year Treasury notes are near a one-year high on speculation tapering is imminent.  (quoted from bloomberg)


Obviously, The FED will have to ensure that the US economy will continue to grow and wouldn't do anything which could derail the economy recovery. (We should be happy when they think about slowing down QE, because its a good sign showing that US is back again.)

Both of the point above had shown us 1 thing, that is the economy of US is still unstable though there are positive sign and if FED slowing down the purchase of Bonds too quickly will surely dampen the growth. In short, the data that being released by US last friday is a SIGN of saying, the slowing down of Bond purchasing wouldn't be so soon and this will remain until we there are 4 consecutive months of 200,000 job growth to justify that the slowing bond purchasing measure wouldn't damper the growth. 

As a result, I think I will call for a Short Term Bull market until the data is strong enough to indicates and allow FED to slow down the asset purchasing measure. 

p/s: I'm sorry for doing this, but as U know, the market changes rapidly to what is happening and human will always do something to change the situation from worst to better.  As a result, we will have to change our opinion and decision as quickly as we can to respond from changes of environment.

No comments:


US Market has been doing well last week, however, its always important to stay cautious.  Stay VIGILANT! DJIA  DJI closed higher over the we...