What’s This About a Hindenburg Omen?

Liz Moyer

It’s hard to say whether those are storm clouds gathering over the stock markets, or whether that’s just the fog that’s lifting after two long years of dizzying volatility. But what about the Hindenburg Omen?

It’s been written about, blogged about and debated over the last few days. Rick Ackerman, a trader who blogs about his investment ideas, says in a post Monday that it’s not something to ignore, but perhaps not something to completely embrace. “Sometimes, though, the canny contrarian has to allow for the possibility that ‘everyone’– i.e., the multitudes who are expecting an autumn crash — will be right for a change.”

Invented in the mid-1990s by a blind mathematician named James Miekka, the Hindenburg Omen is an indicator of a market crash. Every market crash since 1987 has been signaled by the Omen, which was named by a friend of Miekka’s after the airship that exploded over New Jersey in 1937 without warning. (They were going to use “Titanic” but someone beat them to it.) That said, the Omen has also signaled declines when no such decline occurred.

The indicator was triggered by two important statistical events in the last week or so. One, NYSE highs and lows both exceeded 2.5% — stocks reaching 52-week  highs were 2.9% of stocks traded at the Big Board, while stocks hitting 52-week lows were 2.6%. And a second, there was a rising 10-week moving average for the NYSE compared to a negative indicator that shows market fluctuations (the McClellan Oscillator).

The Omen is pointing to September for the next market crash, supposedly, though that’s pretty much when most markets go into a nosedive if they’re so inclined.

The rest is at Forbes.com

Read also The ‘Hindenburg Omen’ is seen. Will a stock crash follow? from Daily Finance.
Wall Street is whispering about the “Hindenburg Omen.” It’s an ominously named technical indicator that is supposed to signal an upcoming stock market crash. “Its creator, a blind mathematician named Jim Miekka, said his indicator is now predicting a market meltdown in September,” reports The Wall Street Journal.

The S&P 500 completed on Friday the biggest three-day decline since July 1. The wobbly stock market has investors worried and searching for clues on the market’s direction.

See full article from DailyFinance

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