Tag Archives: Hindenburg Omen

Hindenburg Creator Takes Off

Even though the so-called Hindenburg Omen is, at best, an imperfect technical indicator and a work in progress in  most analysts vie, its latest appearance has prompted the Omen’s creator, Jim Miekka, to exit the stock market.

“It’s sort of like a funnel cloud. It doesn’t mean it’s going to crash, but it’s a high probability. You don’t get a tornado without a funnel cloud.”

Jim Miekka


“I’m taking it seriously and I’m fully out of the market now,” Miekka, the blind mathematician tells The Wall Street Journal in a telephone interview from his home in Surry, Maine.

“I would’ve probably stayed in until the beginning of September,” depending on how the indicators varied. “That was my basic plan, until the Hindenburg came along,” he says.

The Omen has been behind every market crash since 1987, but significant stock-market declines have followed only 25% of the time.

So there’s a high likelihood that the Omen could be nothing more than a false signal.

But that isn’t stopping Miekka from taking any chances, especially as September – typically the market’s worst-performing month  is only one week away.

“It’s sort of like a funnel cloud,” he says.

“It doesn’t mean it’s going to crash, but it’s a high probability. You don’t get a tornado without a funnel cloud.”

He adds that he’s not currently shorting anything, although he may look to short Nasdaq stock index futures in the next few weeks; “depending on how the technicals go.”

Despite the ominous forecast, there are some glimmers of hope.

Miekka doesn’t expect to sit on the sidelines for very long. In fact, Miekka, who is an avid target shooter despite being blind, is looking at put volumes and various moving averages that will offer clues of when he will start buying again.

Related by the Econotwist:

Feared Indicator Warns Of Catastrophic Stock Market Event

Wall Street: The First Hindenburg Omen Confirmed

Jm Cramer Shoot Down The Hindenburg Omen

Wednesday’s Market Action As Predicted By Jim Cramer

Jim Cramer’s Web Company Investigated By SEC

Jim Rogers Says CNBC Is A PR Agency

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Christopher A. Farrell,Hardcover - Second, Edition: 2,Series: Wiley Trading Series, English-language edition,Pages:187,Pub by Wiley, John & Sons, Incorporated

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Jm Cramer Shoot Down The Hindenburg Omen

Not only did we just have a second, and far more solid Hindenburg Omen confirmation today, with 82 new highs, and 94 new lows, but the Saturday is the day when Iran launches its nuclear reactor, and everyone will be very jumpy regarding any piece of news out of the middle east.

CNBC Host Jim Cramer

As for the Hindenburg Omen, the more validations we receive, the greater the confusion in the market, and the greater the possibility for a melt down (or up, as the case may be now that the market is unlike what it has ever been in the past).

Furthermore, with implied correlation at record levels (JCJ at around 78), any potential crash will be like never before, as virtually all stocks now go up or down as one, more so than ever before.

Well, here’s CNBC‘s Jim Cramer having a bashing over the recent chatter of an impending crash:

Vodpod videos no longer available.

Wednesday’s Market Action As Predicted By Jim Cramer

Jim Cramer’s Web Company Investigated By SEC

Jim Rogers Says CNBC Is A PR Agency

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Wall Street: The First Hindenburg Omen Confirmed

The feared Hindenburg Omen was Thursday confirmed in the US stock market as the number of new highs was 136, and new lows was at 69, according to The Wall Street Journal‘s interactive Market Data Center.

“The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy.”

Zero Hedge


The first omen was spotted on August 12th:The indicator may suggest a savage equity downturn is imminent,” the famous analyst Albert Edwards at Societe Generale said then. Today,  a week later, the Hindenburg Omen has been confirmed for the first time.

Last week’s plunge in US stocks triggered a technical indicator known as the Hindenburg Omen that may signal a more severe selloff.

See: Feared Indicator Warns Of Catastrophic Stock Market Event

The market signal, named for a German zeppelin that caught fire and crashed more than seven decades ago, occurs when an unusually high number of companies in the New York Stock Exchange reach 52-week highs and lows.

The indicator last occurred in October 2008.  The signal occurred seven times in 2008 as the S&P 500 posted its biggest annual drop since the Great Depression.

The Hindenburg Omen must be confirmed with a second occurrence within 36 days to raise the alarm.

And that’s what happened today.

Self-Fulfilling Prophecy

“The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy  – like every other technical indicator,” Tyler Durden at Zero Hedge writes.

In addition; it must also occur when the NYSE McClellan Oscillator, a measure of market momentum, is negative.

Well, today’s were the McClellan oscillator at NYSE was negative at -83.6.

According to Wikipedia this is the following criteria of the Hindenburg Omen, calculated daily using Wall Street Journal figures for consistency:

  1. The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows are both greater than 2.2 percent of total NYSE issues traded that day. Based on approximately 3100 NYSE issues, the 2.2% threshold is 69.
  2. The NYSE 10 Week moving average is rising.
  3. The McClellan Oscillator is negative on the same day.
  4. New 52 Week Highs cannot be more than twice the new 52 Week Lows (though new 52 Week Lows may be more than double new Highs).

“The traditional definition requires each condition to occur on the same day, and be repeated within a 36-day period.”

“The occurrence of all criteria on a single day is often referred to as an unconfirmed Hindenburg Omen, because the indicator has a high false alarm rate.”

An Imperfect Indicator

To eliminate false positives some technical analysts have imposed the condition that the Hindenburg Omen

  • must be triggered 3 times in a row within a month from the 1st triggering event for said initial trigger signal to be considered to be valid
  • is only valid when “all tightly coupled triggerings are within a fortnight
  • will indicate a possible future downturn or correction, depending on the magnitude of any “one off” triggering

The creators of the signal have not fully explained the selection of the threshold value of 2.2% of issues traded.

Because of the specific and seemingly random nature of the Hindenburg Omen criteria, the phenomenon may be simply a case of overfitting. That is, by backtesting through a large data set with many different variables, correlations can be found that don’t really have predictive significance.

The Omen is at best an imperfect technical indicator that is a work in progress, in  most analysts view.

Anyway – here’s Jim Puplava talking about the mainstream media and how they spin the economic news  – and Max Keiser talks about the Hindenburg omen.
Recorded on August 14th 2010:

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