WIKI: HINDENBURG OMEN
This week’s plunge in U.S. stocks triggered a technical indicator known as the Hindenburg Omen that may signal a more severe selloff, according to analysts who follow charts to predict market moves.
The market signal, named for a German zeppelin that caught fire and crashed more than seven decades ago, occurs when an unusually high number of companies in the New York Stock Exchange reach 52-week highs and lows. The indicator last occurred in October 2008, according to UBS AG.
The Standard & Poor’s 500 Index yesterday completed the biggest three-day decline since July 1, after an unexpected increase in unemployment claims added to evidence an economic recovery is weakening. The benchmark gauge for U.S. stocks has dropped 3.4 percent so far this week as Federal Reserve policy makers said growth “is likely to be more modest” than they previously forecast.The indicator may suggest “a savage equity downturn is imminent,” said Albert Edwards, a London-based strategist at Societe Generale SA, who has told investors to favor bonds over stocks for more than a decade.
every NYSE crash since 1985 has been preceded by a Hindenburg Omen.
... The traditional definition of a Hindenburg Omen requires that:
- 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 percent of total NYSE issues traded that day (currently, greater than or equal to 69, which is above 2.2% of 3126).
- The NYSE 10 Week moving average is rising.
- The McClellan Oscillator is negative on that same day.
- New 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.
These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen.
A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.... 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.
LET THE COUNTDOWN BEGIN... SEPTEMBER 24, 2010 IS THE ... DEADLINE...