Is the Hindenburg Omen for Real?
The web is on fire with stories about the Hindenburg Omen that was triggered last week. The Hindenburg Omen is going to make things very bad, very soon, if technical analysts are correct. Never heard of it? You're not alone. It's a market anomaly that happens very rarely. However, when it does happen, it can mean we are heading over a cliff, and fast. The last time it happened? June 2008.
The Hindenburg Omen is created by a combination of factors, the primary being that a substantial number of NYSE stocks hit their 52-week highs and lows at the same time, and that the concentration of those stocks makes up at least 2.2% of the overall number of stocks listed on the NYSE. There are a number of other conditions that add to or detract from the severity of the predicted crash, but the only other mandatory condition is that the number of 52-week highs is less than double the number of 52-week lows.
All these conditions were met last Thursday.
Now, you may doubt that the Hindenburg Omen is a real harbinger of doom. It is, after all, a relatively new indicator postulated in the mid-90's. What there can be no doubt about, however, is how seriously it is being taken by traders. And it is lighting up the Internet.
The Street is on it (link above), CNBC is on it, Forbes is on it, and you can bet your ass Zero Hedge is on it. Hell, even the L.A. Times is on it. Those DXD calls of mine are looking better all the time.
In any case, it looks like we won't have to wait long to see if it's for real. The Hindenburg Omen triggered last week is indicating a back-to-school market crash in September. So what's the consensus, guys? Is it the real deal, or a bunch of chartist hooey?






Comments
First
First
I fucking hope its the real
I fucking hope its the real deal coz i missed the boat last time
I think that even if it isn't
I think that even if it isn't real, the publicity it's receiving might give the momentum to turn it into a self-fulfilling prophecy.
See my other WSO blog posts
Please not again, how many
Please not again, how many years will a graduate have to continue struggling after graduating.
Maybe I do not have quotes under my name on google, but I KEEP IT REAL
olafenizer wrote: I think
I think that even if it isn't real, the publicity it's receiving might give the momentum to turn it into a self-fulfilling prophecy.
I completely agree with you. By the way, I don't think we really are in a rising market and many traders are quite annoyed because they aren't able to reveal a bullish/bearish trend.
It'll most likely become a
It'll most likely become a self-fulfilling prophecy if it's attracting that much media attention. Oh, well...
Well shit.
Well shit.
Yes, the Hindenburg Omen is
Yes, the Hindenburg Omen is real, but a better technical indicator of impending market collapse is when I am searching for a position in finance.
The guy who found it said
The guy who found it said that the mere presence of the omen is no guarantee for a crash at all (but that every crash will be preceded by this anomaly). that being said, i'd probably be a bit worried too if i had any open positions at the moment
it needs to happen twice in a
it needs to happen twice in a rolling 36 day period... someone set the deathclock. and if you need me... ill be over here - in cash.
MonkeyMath wrote: Yes, the
Yes, the Hindenburg Omen is real, but a better technical indicator of impending market collapse is when I am searching for a position in finance.
How do you know its real? This is total bullshit. I'm going to have to agree with Taleb on this one. Humans will do anything to show that they can prove why something happens. So some people in the 90's come up with a set of parameters that meet the conditions of an economic collapse...so what??? I'm sure that could be done countless times, and it has. The sad thing is, is that people on here are right. Even if this has no correlation what so ever, which I highly doubt it does, this could likely turn into a self-fulfilling prophecy. Efficient markets my ass. What a joke.
"and that the concentration
"and that the concentration of those stocks makes up at least 2.2% of the overall number of stocks listed on the NYSE"
that just sounds arbitrary
TrippinBilly wrote: it needs
it needs to happen twice in a rolling 36 day period... someone set the deathclock. and if you need me... ill be over here - in cash.
It already did..8/12 and 8/16
One thing to keep in mind was
One thing to keep in mind was the cause behind the Hindenburg omen last time- a bunch of hedge funds blowing up. Same with the crash of '87 (Caveat- I was getting my news from Sesame Street- which mostly covered Broccoli and crayons- when that happened and just noticed that a lot of my Dad's clients were calling him at home all night long.)
One way of looking at it is the Hindenburg phenomenon is a sympton of a set of faults in the models. The question is how bad is it and how prepared are we for it? Back in 1970, for instance, the market was still being run by folks who survived the Great Depression- and it was unleveraged enough that it could handle the Penn Central default without flinching. IMHO, 2008 wasn't a bigger shock to the markets than Penn Central was, but there was more leverage in the system.
There's less leverage today than there was in 2008. And the fundamental economy is on a little more solid footing. Consumers are less leveraged, oil is cheaper, and there's now an obvious- if long- path to a more sustainable economy for the US.
As a hint of where I think things are going, the MLP sector is setting record highs. MLPs require massive, massive tax work for anyone who owns them. Pipelines and oil trusts are also pretty simple to model. Hence, they typically have a higher institutional ownership and tend to be more driven by models.
MLPs starting taking a big hit back in June of 2008, but this time around, they're doing pretty well, and in fact, following the old rule of thumb of 10-year-treasury yield +4% for a fair price. This time around, it's *possible* that the model-driven funds are recovering and the stuff that fell out of favor as the models broke- like MLPs- are now coming back.
I'm more heavily into cash than I've ever been since 2008 (when my firm capitulated and I was worried about having to live on unemployment)- putting my assets at a mix of 45% CDs, shorter-term TIPS, stable value and cash accounts, and 55% stock. That said, I'm not going to beat a panicked run for the exits because some technician says "There might be a crash this year, but I really don't know. It only happens 25% of the time." Likewise, I'm not going to cancel my Saturday on the Honda CBR down Hwy 9-W because the weatherman comes on and says, "There's a chance of rain, but I'm not really sure." Instead, I'm going to pack my rain gear under the seat and stay within 30 minutes of home in case it starts lightning.
If you've got ten months of emergency savings and the money you've saved up for purchases you intend to make in the next five years in cash, you've got your rain gear and you're within 30 minutes of home.
Work hard, play hard.
this is so fucking
this is so fucking retarded
why do we keep inventing bullshit measures that the media can forcefeed down the public's throats in order to form a self-fulfilling prophecy?
I feel like trends/omens like
noway wrote: this is so
Work hard, play hard.
I went into Taleb's book
dumbyoungbum wrote: I went
Fox news finally got it:
I win here, I win there...
arbitRAGE. wrote: Fox news
"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to become the means by which men deal with one another, then men become the tools of other men. Blood, whips and guns or dollars."
That thing is total crap, if
im going long
dumbyoungbum wrote: I went
I'm in the deflation camp (go
I win here, I win there...
buycredz wrote: That thing is
All I am saying is that its
you people are fucking
I remember reading a post a
My father uses
Three Occurrences in 36 days
Yet in the end, nothing
I win here, I win there...
Wasn't Eddie betting on a 40%
Work hard, play hard.
Less than nothing. Guess they
Edmundo Braverman wrote: Less
Work hard, play hard.
Ha! IP, we posted on top of
IlliniProgrammer
Edmundo Braverman wrote: Ha!
Work hard, play hard.
You're absolutely right. And
Hey guys. Sentiment has
Work hard, play hard.
olafenizer: I think that even