The Market Is Getting Dragged Lower By The Critical Mass of Hindeburg Omens, Weaker Yen, Mortgage Activity

6th Hindenburg Omen In 8 Days Sends Stocks Slumping

As we noted last night, the current cluster of Hindenburg Omens is the most concentrated on record and today just made it worse. Critically, the Hindenburg Omen’s underlying construction is indicative of a market in deep confusion with momentum, advancers, decliners, new highs, and new lows all in divergence. For the 6th day in the last 8, the market has flashed another warning that all is not well in this ‘most levered ever’ equity market.

The equity market internals suggest great confusion…


Is it any wonder?


Charts: Bloomberg

Mortgage Activity Plunges 50% To April 2011 Levels

For the 12th week of the last 14, mortgage applications in the US fell this week. Despite the ongoing (though quietening) exclamation that the housing ‘recovery’ will continue, it is hard for even the most ardent ‘believer’ to still think that a rise in interest rates will have no effect on housing when mortgage actvity has collapsed by ove 50% in the last 3 months. At the lowest level since April 2011, back well below the lowest levels of the 2000s boom with home purchase and refis plunging, we suspect a few ‘investors’ will be rethining their theses (or finding another pillar to base their ‘buys’ on).


Mortgage Apps are down 50% in 3 months…

Yen plunging now

Homebuilders and Real Estate falling into an “Economic sink hole?”

Article Continues Below


Home builders and Real Estate (IYR) gave an early signal to some up coming economic and broad stock market weakness back in 2006 & 2007.

Of late Home builders and IYR are sinking in price, breaking lower below support of large bearish patterns.

Is the message coming from them something important or just noise?

Stocks as overvalued now as at 2007 high

Commentary: Valuation model with good record flashing “sell”

The Stocks Market Is Still All About Yields And The Japanese Yen

This morning, the S&P 500 Index e-mini futures (ES-U3) are trading lower by 3.00 points to 1687.75 per contract. It seems that the major stock market indexes are just spinning wheels in the mud and really going nowhere. The two most important charts that any trader can follow are the 10-year bond yield chart, and the USD/JPY chart. Higher yields are problematic for the real estate stocks, housing stocks, mortgage REITS, and Utility stocks. When the USD/JPY chart declines it will hurt the highly leveraged institutions that are playing that carry trade, so this will usually hurt stock prices. As for everything else in the market, it is simply just noise. Some equities that are important to follow include the iShares Barclays 20+ Yr Treasury Bond (ETF) (NYSEARCA:TLT), iShares Barclays 7-10 Year Treasury Bond Fund (NYSEARCA:IEF), and the CurrencyShares Japanese Yen Trust (NYSEARCA:FXY).


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