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article imageWhat is this thing called the Hindenburg Omen?

By Andrew Moran     Aug 18, 2010 in Business
New York - There have been numerous reports all over mainstream media outlets and financial news blogs about something called the Hindenburg Omen, which is something that, if true, will turn out to be horrendous for the markets.
“Easily the most feared technical pattern in all of chartism (for the bullishly inclined) is the dreaded Hindenburg Omen. Those who know what it is tend to have an atavistic reaction to its mere mention,”wrote the pseudo-anonymous writer of Zero Hedge, Tyler Durden.
The Hindenburg Omen is a technical analysis that attempts to predict the forthcoming stock market crash. This analysis is based on Norman G. Fosback's High Low Logic Index and was named after the 1937 crash of the German zeppelin Hindenburg.
This market phenomena rarely happens in the global financial world but if it does actually occur, be prepared for a huge crash.
According to Wall Street Oasis, there are a number of indicative factors of the Hindenburg Omen:
1) The daily number of both New York Stock Exchange 52- week highs and lows are higher than 2.2 percent of the overall stocks traded on the day.
2) The McClellan Oscillator – indicator of how much money is entering or exiting the market – is negative on the same day.
3) The finite impulse response filter – otherwise known as the moving average, or running average – rises on the same day.
4) New 52-week highs cannot double the new 52-week lows.
Since this became a huge story in the financial news media, both proponents and debunkers talked to the media and explained what it was, what could happen – or what won’t happen – and why is it springing up.
“My own technical analysis shows that we are somewhat oversold here, so I think the next move is probably higher,” said technical analyst Jody Eisenman, reports AOL News. “However, as summer volume remains light and should continue this way until Labor Day, anything can happen. I, for one, wouldn't bet my bottom dollar on a crash.”
“This is not to dismiss the indicator, but like all good technical analysis, the signals from one indicator should be verified using signals from another indicator that measures the same events in a different way,” said the CEO of Guppytraders.com, Daryl Guppy, reports CNBC.
When should we expect this disaster to happen? Well, Gold Seek and Zero Hedge claimed that the criteria were met last Thursday. The omen seems to be pointing towards September.
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