Posted on 08/26/2010 1:33:01 PM PDT by FourPeas
Way too much attention paid to the Hindenburg Omen, that this dreaded technical pattern flashed a negative signal recently in the markets, indicating a coming crash.
Supposedly two Omen signals flashed fire engine red recently.
But market analysts say that didn’t happen.
A 50-year old financial newsletter writer, James Miekka built the Hindenburg Omen in 1995 using a calculus essentially based on Norman G. Fosback's High Low Logic Index.
It essentially looks at stocks trading at 52-week highs and lows, and more moving parts that must miraculously line up in syzygy for the Hindenburg Omen to be set alight and then blow to smithereens over the markets.
Logic being that in a healthy market, stocks either set new yearly highs or annual lows, just not both at the same time. An unhealthy market with both new highs and lows portend a “to the lifeboats, stop the market I want to get off” moment.
As if we haven’t had enough of those already.
Here are the five criteria for the Omen, named after the crash of the German zeppelin in May 1937, courtesy of my Wall Street traders:
1. The daily number of new 52 week highs in stock trading and the daily number of new 52 week lows on the Big Board are both, emphasis on both, greater than or equal to 2.8% of the sum of the NYSE stocks that climb higher or drop in trading on a given day (84 stocks, NOTE THAT, STOCKS).
2. That the NYSE index is greater in value that it was in trading 50 trading days prior. Initially a rising 10 week moving average was used, but it was ditched for 50 to be more current.
(Excerpt) Read more at emac.blogs.foxbusiness.com ...
I’ll believe Glenn Beck before i would believe a Fox Business babe.
Fascinating. Why is that?
Probably because of the cool name.
It certainly has an ominous ring to it.
I’m out completely as of today.
The HO is only part of it. I use my own relative strength indicators and they will very likely not be triggered (to get in) by the end of August. Back to the sidelines until October.
But the HO was spot on in the past 10 years as a top predictor. Now if we were in an extended bull market, the HO is a grain of salt.
Ive got foolproof systems to beat roulette, slots, craps and the markets. Just send me your money. Nevermind why I would want or need to sell this info. sarc.
From my reading of history, the HO has a spotty record. That’s not to say I think being in the market is a good idea right now.
I believe September is the worst month for the market in a historical context. And then we’ve seen volatility in Octobers past. Probably a good idea to sit out these two months IMO. I’ve been ‘underweight’ stocks since November 2008.
excerpt:
“Complex and esoteric even in the world of technical indicators, the Hindenburg Omen is triggered when the following occurs, Zero Hedge reports:
* — The daily number of NYSE new 52-week highs and the daily number of new 52-week lows must both be greater than 2.2% of total NYSE issues traded that day.
* — The NYSE’s 10-week moving average is rising.
* — The McClellan Oscillator (a technical measure of “overbought” vs. “oversold” conditions) is negative on that same day.
* — New 52-week highs cannot be more than twice the new 52-week lows. This condition is absolutely mandatory.
These criteria have been hit twice since Aug. 12, prompting Miekka to get out of the market entirely, The WSJ reports. Judging by the recent market action, many others are following suit — or at least moving in the same direction.”
I’m taking my chances. What the heck.
Yep. Something so technical often has people on both sides of it.
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