Hindenburg Omen

August 13, 2010 by staff 

Hindenburg Omen, The incident “Hindenburg Omen” recorded yesterday, August 12 at the New York Stock Exchange. Also triggered nearly a day earlier, on 11 August. So what exactly is this technical indicator feared, and what does it mean? The Omen Hindenburg named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.

The Hindenburg prophecy occurs when a number of technical indicators to align on the NYSE. It was a fairly accurate prediction of an imminent stock market crash. However, and importantly, a confirmed Hindenburg Omen requires a second (or more) of activation within the next 36 days. In other words, another line of the Hindenburg Omen in the near future will give a positive confirmation of an imminent market decline likely to be steep.

The criteria for the technical indicator are:

1. That the daily number of 52 new New York Stock Exchange Week Highs and the daily number of new 52 Week Lows must be greater than 2.2 percent of total issues traded NYSE that day.

2. That the smallest of these numbers is greater than or equal to 69 (68 772 is 2.2% of 3126). This is not a rule but rather as a checksum. This condition is a function of 2.2% of total emissions.

3.That the NYSE 10 week moving average is rising.

4.That the McClellan Oscillator is negative on that same day.

5.That new 52 Week Highs can not be more than double new 52 Week Lows (however, it’s fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

The indicator denotes unhealthy internal market with a large number of stocks making two new highs and new lows. It suggests a lack of internal consistency in the stock market and, therefore, a much higher probability than normal for a steep decline.

According to UBSanlyst Michael Riesner technique, “is an interesting name, but what really have the technical background phase distribution is a classic in the market,” said Riesner. “It’s the classic tug of war between bulls and bears you have there.”

The latest indication came in October 2008, according to UBS AG, and initiated a total of seven times in the year 2008 as the S & P 500 posted its biggest annual decline since the Great Depression. The Omen Hindenburg would also triggered the June 13, 1921 June June 22, 2007 near the top of the U.S. equity markets.

Looking back at historical data, the probability of a movement of more than 5% down after a confirmed Hindenburg omen 77%, and usually takes place over the next forty days.

The probability of a distress sale was 41% and the probability of a major stock market crash was 24%. A confirmed Hindenburg omen occurred before every major stock market crash since 1985. In other words, if the alignment of yesterday is confirmed by another Hindenburg omen in the next 36 days, it may be time to go to the mountains – if you do not.

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