Is the Hindenburg Omen for Real?ST
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?
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