Tuesday, May 11, 2010

WARNING: Hindenburg Omen Triggered 2010

The hydrogen in the Hindenberg has been replaced by hot air from Eurozone politicians. - comment from Fort Wayne Politics

SHOOT: I haven't done much research here, but what I do know is that around the world stock markets have recently swung wildly in both directions. That only happens when there is a lot of fear and desperation in the markets. Please note there is a little uncertainty whether a HO was triggered, note the italics at the bottom of the article [link immediately below]. But what this could mean is a major correction, a crash, is imminent within days or weeks. Take note.

I don’t give investment advice and I’m not about to start now. However, I want to point out a specific technical indicator that has successfully predicted every stock market crash in the last 50 years - the
Hindenburg Omen.

The indicator is based on the following premise: either a large number of stocks should be setting new highs OR new lows but not both. When both occur it points to large amount of uncertainty in the market and that has historically been a precursor to market crashes. There are a few other criteria that must be met but having a large number of 52 week highs and lows is the dominant factor.

By my calculation the indicator has now triggered. Keep in mind that this indicator does have a number of false alarms - i.e. the market does not have a major downturn every time the indicator triggers. In order to reduce these false alarms a Hindenburg Omen is not confirmed unless there are 3 triggers on separate days with 2-4 weeks. Today was day one.

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1 comment:

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