Hindenburg Omen 13Aug2010

[Timmy]

The Hindenburg Omen ... hmmmm ... certainly sounds scary, which is probably the point.

Couple of articles on the weekend discussing it:

http://online.wsj.com/article/SB100...5427791421316112.html?mod=WSJ_article_related (WSJ paid article, you may have to search for it if not a subscriber ... hint: use Google News)

and

http://pragcap.com/hindenburg-omen-savage-downturn-ahead

The PragCap post gives the criteria and quotes Wikipedia (Wikipedia, forsooth ... DYOR):

Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days.

The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%.

However, the occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down, although every NYSE crash since 1985 has been preceded by a Hindenburg Omen

A 5% decline in the ES (Friday's close) would take it to about 1021 ... sometime in the next 40 days ... worth noting that the range of the ES in the 40 (calendar) days preceding Aug 13 has been about 1010 to 1127.

So, at the least, The Omen (love capitalising it) is calling for a move to, and break of, pretty much the previous 40 day's low, sometime over the next 40 days. Unfortunately 'panic sellout' and 'major stock market crash' are left undefined. Again, DYOR and make your own decisions.

The WSJ further notes:

The Omen was behind every market crash since 1987, but also has occurred many other times without an ensuing significant downturn. Market analysts said only about 25% of Omen appearances have led to stock-market declines that can be considered crashes.

Again, not many definitions being, ahhh, defined.

Still, 25% chance of a presumably significant decline sometime in the next 40 days ... worth being aware of.

 

[Timmy]

Here are a couple of irrelevant facts about The Omen (only posting this so I can capitalise The Omen again ... and again).

the Hindenburg Omen's name was coined by a fellow market technician, Kennedy Gammage, when they found out the name "Titanic" already had been taken.

creator, a blind mathematician named Jim Miekka

And my favourite quote of the article,

"I'll be dancing close to the door," he said.

http://online.wsj.com/article/SB100...5427791421316112.html?mod=WSJ_article_related ... & again, WSJ paid article, you may have to search for it if not a subscriber ... hint: use Google News

 

[basilio]

Well that should just about do it !! If enough significant investors think there is going to be a market crash in few weeks and start edging to the doors... well its all over.

Another reality might be that when you start to soberly analyse what is happening economically in Europe, England, America you could also come to the conclusion that we are in for a very rough time. In fact I think it would only take another significant piece of bad news from anywhere to see the markets tip.

 

[Timmy]

Be interesting to hear thoughts on whether The Omen is perhaps a product of back-fitting / curve-fitting?

 

[ginar]

Be interesting to hear thoughts on whether The Omen is perhaps a product of back-fitting / curve-fitting?

absolutely no doubt about it

 

[Timmy]

absolutely no doubt about it

So much for that discussion

 

[moXJO]

Seems to be a lot of the doomsday cult preaching the second coming is almost upon us the last few weeks.

 

[professor_frink]

Has it been confirmed by a 2nd signal yet Timmy?

Here's a decent description of it for you:

http://www.financialsensearchive.com/fsu/editorials/mchugh/2008/0705.html

The traditional definition of a Hindenburg Omen is that the daily number of NYSE New 52 Week Highs and the Daily number of New 52 Week Lows must both be so high as to have the lesser of the two be greater than 2.2 percent of total NYSE issues traded that day. However, this is just condition number one. The traditional definition had two more filters: That the NYSE 10 Week Moving Average is also Rising, which we consider met if it is higher than the level 10 weeks earlier (condition # 2), and that the McClellan Oscillator is negative on that same day (condition # 3).

Basically it's just looking to define an unstable market.

I used to have a fair bit of info on it, but it seems to have been lost last time I did a format of my HD, which probably says a little bit about my opinion of it!

From what I can remember of it, it needs to be confirmed by a 2nd occurance within about a month or so, and even then, I wouldn't base an actual decision of off it. It's an ok heads up that all isn't well with the market, but at the moment, pretty well every man and his dog has picked up on that one

 

[professor_frink]

Oops, left this out:

http://www.cxoadvisory.com/technica...ed:+cxo+(CXO+Advisory+Blog+-+Investing+Notes)


Good info as always from cxoadvisory

 

[Timmy]

Has it been confirmed by a 2nd signal yet Timmy?

Apparently it was only triggered on Friday (the 13th ... spooky ), so no chance for a second signal yet? TBH I have never heard of it before, and yeah if I reformatted my hard drive and lost info about it I wouldn't be all that fussed either

Good info as always from cxoadvisory

CXO always helpful for a reality check

 

[professor_frink]

Apparently it was only triggered on Friday (the 13th ... spooky ), so no chance for a second signal yet? TBH I have never heard of it before, and yeah if I reformatted my hard drive and lost info about it I wouldn't be all that fussed either



CXO always helpful for a reality check

Robert McHugh seems to be one of main authorities on this thing, he always looked for a cluster of signals(at least 2) in short succession for it to be valid. One on it's own apparently doesn't mean anywhere near as much.

In the link I posted above Timmy, there is a list of all of the confirmed signals going back to 1985, if interested have a look at some of the dates with a chart of the $SPX to gauge what can happen(or not happen as the case may be) when these things trigger

 

[Timmy]

This Hindenburg Omen thingy continues to attract attention. Way too much IMHO. But, if someone wants to use it I say hey, whatever floats your boat (or crashes your airship).

First, a correction – I said The Omen was triggered on Friday the 13th, it actually triggered on Thursday the 12th.

Prof – there may have been a trigger back in July (and not sure the one on August 12 was within the timeframe specified). Also, I say ‘may have been a trigger’ because there is some doubt (see second link, below):

http://ftalphaville.ft.com/blog/2010/08/13/314836/hindenburg-sighted/

http://markostake.blogspot.com/2010/07/hindenburg-omen-confirmed-or-was-it.html

http://www.investingcontrarian.com/financial-news-network/here-we-go-again/

There is also a good article on Think BIG ( http://www.bespokeinvest.com/thinkbig/2010/8/18/know-your-indicators-hindenburg-omen.html ) that questions whether the stocks that were hitting new highs on Thursday (the 12th) should really be considered as stocks … more details in the article. In summary, though:

Call us crazy, but an indicator that measures the internals of the equity market should probably avoid using fixed income securities in its analysis.

 

[Agentm]

by my count its up to three in a week so far..

which in my view is starting an alarming trend.

82 new highs and 92 new lows and two HO in a row this week if your counting the one last week, then 3 in a week

i wonder how many baby boomers are going to enjoy any further market collapses?


for 15 weeks straight the US equity funds have been withdrawing despite the massive 10% surge in the Sp500, and that was managed with trade on vapour..

i see it much as kyle bass said last week, Given My Outlook On The World, I Don't Know How You Can Be Long Stocks

 

[MrBoJangles]

Last post 21 Aug - has this particular threat indicator now deemed to have failed this time?

Mr Bo

 

[Agentm]

its intriguing

the events subsequent to the hindenburg omen have failed to eventuate.

i recall some saying that technically there were some in the high category that were not really a stock in any case in a true sense

whats curious is that TA is not proving to be accurate. lately so many of the key positions taken are so identical, its going to be shock and awe when things change

i wonder which one will win out, equities or bonds

the signals of change sure blew away

 

[Smurf1976]

I suspect that the actions of the Fed may well explain recent market performance. If that's the case then trying to predict what happens next isn't going to be easy...

 

[professor_frink]

Thought I might bump this one up.

Some warning signs that this rally isn't very healthy, a move down tonight could see a HO trigger FWIW.

Seems to be a bit of complacency around at the moment, sentiment is still a little frothy, and there seems to be quite a bit of insider selling going on(details)

Whilst I personally wouldn't short this rally yet, given the favourable time of year and the POMO machine in full swing, it does look a little concerning IMO.

 

[nomore4s]

Thought I might bump this one up.

Some warning signs that this rally isn't very healthy, a move down tonight could see a HO trigger FWIW.

Seems to be a bit of complacency around at the moment, sentiment is still a little frothy, and there seems to be quite a bit of insider selling going on(details)

Whilst I personally wouldn't short this rally yet, given the favourable time of year and the POMO machine in full swing, it does look a little concerning IMO.

Some of my breadth indicators also indicate the rally is weakening, but like you not enough evidence to get short atm.

 

[Agentm]

the 14th dec was the last hindenburg omen

we are in the 39 - 55 day zone i guess

 

[greggles]

The Hindenburg Omen has recently been triggered on the NASDAQ 100 index. All pumped up on AI hot air, is the NASDAQ due for a correction?

What Is the Hindenburg Omen?

The Hindenburg Omen is a technical indicator that was designed to signal the increased probability of a stock market crash. It compares the percentage of new 52-week highs and new 52-week lows in stock prices to a predetermined reference percentage that is supposed to predict the increasing likelihood of a market crash.

Hindenburg Omen: Definition, 4 Main Criteria, and Example

The Hindenburg Omen is a technical indicator that was designed to signal the increased probability of a stock market crash.

www.investopedia.com

An Ominous Signal—the Hindenburg Omen—Is in Focus as Stocks Hit Record Highs

The Hindenburg Omen, an indicator that at times has signaled when the stock market is about to crash, remains in focus as the S&P 500 hovers near record highs. Here's how it's identified and applied.

www.investopedia.com