We heard a lot about the Hindenburg Omen in the last couple of weeks, a series of internal technical indicators devised to predict major market crashes – the storied black swan events, in other words. I have no idea whether it is predictive or not, but apparently multiple occurrences of the Hindenburg Omen serve to reinforce the likelihood of a crash.
Well, folks, we’ve now had our second Hindenburg Omen in as many weeks. The first occurred on August 12 (my 21st anniversary…but I’m not superstitious). The second occurred Friday, although according to a WSJ article, all but one indicator was tripped on Thursday as well.
It feels as much like an imminent market crash as 2005/2006 felt like an imminent housing crash. I lay the blame at the feet of the geniuses in Washington, D.C. and their opportunist compatriots on Wall Street who are soaking the taxpayers for all their worth. Literally.
When everyone’s bearish, don’t always buy
By Option Trading Blog on August 31st, 2010
In a normal market, the contrarian philosophy is to do the opposite of whatever everyone else is doing. If everyone’s bullish, sell. If everyone’s bearish buy.
In most markets, that is the way to make money. In some markets…like this one, I’d argue…it’s a good way to get taken to the cleaners. The reason? We’re in a deflating bubble, not your normal market.
Remember the infamous Tulip Bubble of 1637 in Holland? Would it have been a great investment to buy tulip bulbs on the way down? Probably not.
Neither should any sane investor buy stocks right now, unless for a quick trade or to cover a short position.