We might see some slop in the market today, because our old pal The Hindenburg Omen made another appearance before the close on Friday, sending the Dow down a healthy 208 points. It's the second time this year the Omen has been logged, but so far there hasn't been any lasting damage. In fact, for all the times it's been tripped over the past four years, nothing has really come of it.

But it's fun for the permabears to talk about, and a 200-point drop in the last hour of trading is bound to get some chins wagging on CNBC. So far, however, most of the stocks I follow are up pre-market. Still, some believe the Omen is a harbinger of a major crash.

While the Omen foreshadowed significant drops in 1987 and prior to the 2008 financial crisis, it has proven to be a false alarm more often than not. Significant stock-market declines have followed the indicator just 25% of the time. For instance, the technical signal flashed in August 2010, when the Dow was trading in the low 10000s. It has since rallied more than 5000 points in less than three years.

I'm not putting much stock in it this time (no pun intended). The market was a lot spookier in 2010 and look what happened. I'm not saying that a crash can't happen, I'm just saying that it wouldn't bother me much if it did (margin calls aside, of course). I'm comfortable with what I own and wouldn't mind buying more even cheaper.

But it could be an opportunity for some hefty volatility plays. I'm thinking TVIX might be fun to trade this week, and it's stupid cheap relative to where it's been (yes, I know there's no correlation between 52-week highs and lows on a sentiment index). Could be a quick 15-20% if the market gets slammed around a bit today.

What do you guys think? Is it the big one, Elizabeth? Or is it just more technical analysis mumbo jumbo? What do you guys think of the TVIX today?

The WSO Advantage - Land Your Dream Job

Financial Modeling Training

IB Templates, M&A, LBO, Valuation. Learn More.

Wall St. Interview Secrets Revealed

30,000+ sold & REAL questions. Learn More.

Find Your Mentor

Realistic Mock Interviews. Learn More.

Comments (5)


Why not UVXY?

Rarely will any of my posts have enough forethought/structure to be taken seriously.


That'll work too, but TVIX is 2x levered. Leverage is delicious.

In reply to Edmundo Braverman

Edmundo Braverman:

That'll work too, but TVIX is 2x levered. Leverage is delicious.

Something about Turbo Leverage = Capital Explosion or something...

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."


To unlock this content for free, please login / register below.

Connecting helps us build a vibrant community. We'll never share your info without your permission. Sign up with email or if you are already a member, login here Bonus: Also get 6 free financial modeling lessons for free ($200+ value) when you register!

What's Your Opinion? Comment below:

Login or register to get credit (collect bananas).
All anonymous comments are unpublished until reviewed. No links or promotional material will be allowed. Most comments are published within 24 hours.
WallStreet Prep Master Financial Modeling