Its Over, page-22510

Hindenburg Omen has just been triggered This is a MAJOR warning signal A thread

https://x.com/GameofTrades_/status/1805998184671723717

2/ The Hindenburg Omen was developed in 1937, giving us almost 100 years of data to evaluate its effectiveness It has signaled important peaks on the NASDAQ 100, including 1987, 1999, 2007, and 2021

https://x.com/GameofTrades_/status/1805998187456676242

3/ The longevity of this signal is significant Since it was created in 1937, all subsequent signals have tested its quality Unlike many modern signals that are retrofitted to work well in hindsight

https://x.com/GameofTrades_/status/1805998190900232537

4/ Most market signals are designed with hindsight bias Meaning their formulas are tweaked until they show good past performance The Hindenburg Omen stands out because it was established long before it could be retroactively adjusted

5/ Let’s examine the Hindenburg Omen's track record on the NASDAQ 100 over the past 25 years It has accurately anticipated significant market peaks, such as those in 1999 and 2007

https://x.com/GameofTrades_/status/1805998196067549280

6/ It also predicted many recent peaks, including those in 2015, 2018, 2019 And 2021, just before a 25% drop in the NASDAQ 100

https://x.com/GameofTrades_/status/1805998198730924422

7/ Today, the Hindenburg Omen is flashing again While not as strong as in 1999 or 2007 Similar signals in the past have led to average drawdown of 15% At Game of Trades, we regularly monitor such Market Internal signals

https://x.com/GameofTrades_/status/1805998201528598559

8/ The Hindenburg Omen triggers when many stocks in an index hit new annual lows While the overall market trends higher This is not normal behavior

https://x.com/GameofTrades_/status/1805998204485537989

9/ Normally, a significant number of stocks are either making new annual highs or lows When both occur simultaneously, it suggests that despite a rising market, there's underlying weakness Which we're witnessing now

https://x.com/GameofTrades_/status/1805998207295799683

10/ Since Jan 2023, the S&P 500 has surged by 40% However, the $RSP index, which neutralizes large tech company contributions Has only risen by 15% Showing the S&P 500 is driven by a few big tech names

https://x.com/GameofTrades_/status/1805998210143682869

11/ It’s important to note that while the Hindenburg Omen often precedes market corrections It doesn't predict immediate downturns In 2007, a similar signal appeared, but the market peaked 5 months later

https://x.com/GameofTrades_/status/1805998212844765616

12/ Similarly, in 2000, the Hindenburg Omen flashed in December
But the market didn't peak until March 2000, 3 months later
https://x.com/GameofTrades_/status/1805998215826940244

13/ The Hindenburg Omen isn't a precise market-timing tool It just indicates increased risk of a substantial correction Today, if the signal strengthens It could resemble the setups before major crashes in 2000 and 2008
https://x.com/GameofTrades_/status/1805998219027173496

14/ The Hindenburg Omen isn't perfect though For instance, it triggered in 1997 But the NASDAQ 100 continued to rise for 2 more years

https://x.com/GameofTrades_/status/1805998221690601518


15/ However, it did warn investors before other significant corrections Such as 1990 and a few months before the 1987 Black Monday crash

https://x.com/GameofTrades_/status/1805998224462991833

16/ Despite the warning signal, the S&P 500 remains in a bullish technical structure for now This is why we've been aggressively long on the market throughout 2024

https://x.com/GameofTrades_/status/1805998227868840427

....in all probability, most people would simply shrug off this warning.

....But the caveat is that a crash similar to 2000 & 2008 may not happen in the very near future BUT we are getting closer to it, close enough to give some thought about our risk positions BECAUSE what we're seeing today and Where We're AT bears resemblance to those periods when risk of a crash is heighten.

Here are some of those signs:
1. Narrow market breadth while market indices continue to make new all time highs
2. Market leadership seen in one poster child stock - NVIDIA (like Cisco in 2000)
3. Market and risk complacency runs supreme, with no >2% declines in a given day for many months now
4. Market valuation eg PE>20x with lofty growth expectations especially with mega techs
5. Speculative mania going over the top - option trading, meme stocks, cryptos
6. Higher for longer interest rates threatening to tip the US economy into a recession
7.  Major risks in CRE, CLO (collaterised loan obligations), Yen carry trades, waiting to implode
8. Geopolitical and election risks

Old fashioned investing is Buy and Hold. But if you look back in history, there have been periods of time when equities did bugger all for an extended period after a crash and many stocks never recovered, even blue chip leaders stagnate.

A cash holder earns 5% now, an equity holder could first face a -50% decline and then years to recover. After the crash, cash holder could buy the same stock after a -50% decline and double its value when it recovers back to same level before the crash years later. The equity holder recovers his principal few years after the crash but earned nothing. The buy and hold equity holder will say- hold and you would get it back, through time. The cash holder makes more than doubles his/her principal without suffering an emotional rollercoaster associated with a crash.