The NYSE gave us a second Hindenburg Omen yesterday. As I said earlier, I just noticed the first one on Tuesday. There may even have been one on Monday, as well. The point is, Hindenburg Omens come in clusters. A single omen has no meaning, but multiple omens are the harbingers of crashes.
The S&P futures are up to 1215.00 this morning, which translates to approximately 1219.00 in the cash market. My model suggests that the SPX will do a touchback of its mid-cycle resistance line at 1224.16 or its 50 day moving average at 1225.38. Timelines; the model suggests the retracement may be over by noon (EST) today.
If the SPX resumes its decline by late morning or early afternoon, there may potentially be as much as $2.6 billion worth of open interest contracts in puts trapped at 1225.00. At that point, there will be no other form of hedging than to sell short.
So, if resistance holds at 1225 and the SPX begins its decline, look for a sudden spike in volume that announces a potential crash. Of course, Wall Street may find a way to dodge this bullet as well. So I am just the messenger announcing the bullet that they must dodge by the end of the day.
In the meantime, traders are already on edge due to the increased volatility.
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Second Hindenburg Omen?
Published 12/15/2011, 09:39 AM
Updated 07/09/2023, 06:31 AM
Second Hindenburg Omen?
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