Friday the 13th and the Hindenburg Omen ...
For the would-be investors out there, and for what it's worth, the Hindenburg Omen is one of those quirky stock market leading technical indicators ... however, one that has a near perfect record of predicting market crashes.
(snip)"Welcome to Friday the 13th, the day that could potentially bring us our second Hindenburg Omen as we did meet all the conditions for one yesterday as I suspected we would. This morning the equity futures are lower after being first substantially higher overnight. The dollar is slightly higher, bonds are higher, and both oil and gold are about flat.
There were 92 new 52 week highs and 81 new lows on the NYSE yesterday, meeting the 2.2% of shares requirement for the Hindenburg. The NYSE 50dma was also rising, the McClelland Oscillator was negative on the same day, and new highs were not twice the amount of new lows.
This, by itself, gives us very high odds of experiencing a significantly lower market sometime within the next 4 months. Receiving a second confirming Hindenburg gives us very high odds of experiencing a decline that meets the definition of a market crash (-15% or more). That second observation could come today, or at anytime within the next 36 days. The last time we had a confirmed Hindenburg was in June of 2008, and I don’t think I need to show you a chart to know what the result was. No market crash in the past 25 years has occurred without a Hindenburg Omen in place. When they occurred in 2008, it was not long before serious declines began. So, it is time to buckle up, I believe we are likely to get confirmation and that it is telling us we are ready to make the trip down to the large H&S target of SPX 860 – that decline from this week’s high is approximately a 24% plunge. If you own stocks, you will definitely want to miss that.
A Hindenburg Omen is telling us that the market is hugely divergent internally - conflicted. This is the same thing that the many 90%+ up and down days has been telling us. Conflicted markets do not rise, they fall. A rising market requires uniformity and conformity. This market is as high as it is based upon manipulation - I know it, you know it, and now the market is telling us it's ready to correct that condition."(snip)
from
from Wiki ...
Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days.
The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%.
However, the occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down, although every NYSE crash since 1985 has been preceded by a Hindenburg Omen.
Re: Friday the 13th and the Hindenburg Omen ...
From:
http://www.dailyfinance.com/story/in...llow/19593800/
The Hindenburg Omen's track record hasn't been sterling -- it was behind every market crash since 1987, but also has occurred many other times without a big downturn following. The Journal reports, "Market analysts said only about 25% of Omen appearances have led to stock-market declines that can be considered crashes."
Re: Friday the 13th and the Hindenburg Omen ...
Given its track record, there's about a one in four chance of a crash.
Re: Friday the 13th and the Hindenburg Omen ...
Given my quarter, it's 50/50!
Re: Friday the 13th and the Hindenburg Omen ...
Re: Friday the 13th and the Hindenburg Omen ...
Quote:
Originally Posted by
hockeybobby
OMG we're doomed.
That's the spirit!
Re: Friday the 13th and the Hindenburg Omen ...
Re: Friday the 13th and the Hindenburg Omen ...
Quote:
Given its track record, there's about a one in four chance of a crash
24% actually ... as I included in the OP.
Re: Friday the 13th and the Hindenburg Omen ...
and a confirmation today ...
(snip)"Today we got our first Hindenburg Omen confirmation. The number of new highs was 136, and new lows was at 69 (per the traditional WSJ source). Granted this particular criteria set was a little weak as the 69 is precisely on the borderline for confirmation (the 2.2%), and the new highs number was not more than double the new lows (although it was close). Less gating were the McClellan oscillator which was negative at -83.6, and the 10 week MVA, which rose, which were the two remaining conditions. The first omen was spotted on August 12 - a week later the H.O has been confirmed. 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). "(snip)
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Re: Friday the 13th and the Hindenburg Omen ...
(snip)"Second Hindenburg Omen Confirmation In As Many Days, Third H.O. Event In One Week
Longs may be forgiven if they are sweating their long positions over the weekend: 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. As for the Hindenberg 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. And should the High Frequency Trading STOP command take place, the future should be very interesting indeed (at least for the primary dealers, and the Atari consoles which are unable to VWAP dump their holdings in the nano second before stuff goes bidless). "(snip)
from
Re: Friday the 13th and the Hindenburg Omen ...
serious technical analysis of the Hindenberg Omen is as follows ...
(snip)"Based upon the five parameters noted above, here's what we found: Confirmed Hindenburg Omens are very rare. There have been only 27 confirmed Hindenburg Omen signals over the past 25 years. June 16th, 2008's was the 27th. This is amazing when you consider that during that time span, there were roughly 6,300 trading days. Of those 6,300 trading days where it was possible to generate a confirmed official Hindenburg Omen, only 191 (3.0 percent) generated one, clustering into 27 confirmed potential stock market crash signals.
If we define a crash as a 15% decline, of the previous 27 confirmed Hindenburg Omen signals, eight (29.7 percent) were followed by financial system threatening, life-as-we-know-it threatening stock market crashes. Three (11.1 percent) more were followed by stock market selling panics (10% to 14.9% declines). Four more (14.8 percent) resulted in sharp declines (8% to 9.9% drops). Six (22.2 percent) were followed by meaningful declines (5% to 7.9%), four (14.8 percent) saw mild declines (2.0% to 4.9%), and two (7.4 percent) were failures, with subsequent declines of 2.0% or less. Put another way, there is a 30 percent probability that a stock market crash -- the big one -- will occur after we get a confirmed (more than one in a cluster) Hindenburg Omen. There is a 40.8 percent probability that at least a panic sell-off will occur. There is a 55.6 percent probability that a sharp decline greater than 8.0 % will occur, and there is a 77.8 percent probability that a stock market decline of at least 5 percent will occur. Only one out of roughly 13 times will this signal fail.
All the biggies over the past 25 years were preceded and identified by this signal (as defined with our five conditions). It was on the clock just before the stock market crash of the autumn of 2008. It was present and accounted for a few weeks before the stock market crash of 1987, was there three trading days before the mini crash panic of October 1989, showed up at the start of the 1990 recession, warned about trouble a few weeks prior to the L.T.C.M and Asian crises of 1998, announced that all was not right with the world after Y2K, telling us early 2000 was going to see a precipitous decline. The Hindenburg Omen gave us a three month heads-up on 9/11 (2001), and told us we would see panic selling into an October 2002 low, warned in October 2007 that a multi-month 16 percent plunge was about to start, from the DJIA's all-time high. And it was on the clock three months before the stock market crash of the autumn 2008 into spring 2009 that wiped out 47.3 percent of the stock market's value. Our subscribers at were informed immediately as these signals were generated. This latest unconfirmed Hindenburg Omen August 12th, 2010 has thirty-six days to find a confirming partner observation."(snip)
I would add that the August 12th H.O. event has now been confirmed ... twice !
(snip)"What does it mean for traders and investors when we get a confirmed Hindenburg Omen? This is really important to understand. A confirmed Hindenburg Omen is not a guarantee of a stock market crash. The odds of a crash based upon the history since 1985 is 29.7 percent. That means the odds we will not have a crash are quite high, at 70.3 percent. However, since a stock market crash is akin to economic death in many circles, you can look at the situation like this.
If you were hearing from your doctor that the surgury you are contemplating stands a 30 percent chance of you dying, that becomes a very high percentage probability - one you likely do not want to take if the surgury is not absolutely necessary. A 30 percent probability of a stock market crash is extremely high when you consider that there have been only eight over the past twenty-five years, and the normal odds of a crash happening randomly are only about one-tenth of one percent.
You now also have to factor that the Fed is pumping liquidity to prevent crashes once these signals occur. So you do not want to go short the farm. You may want to think about taking prudent precautionary action according to your investment advisor given the much higher than normal odds of a crash. That may not mean shorting. It may mean increasing cash positions or hitting the sidelines for a while. Or it may mean a carefully constructed shorting strategy developed with your advisor that limits losses, and invests only the amount which you can afford to lose. Still, it is interesting that even with the heavy liquidity the Fed has been pumping around the time of the past two signals, the odds of a 5 percent decline or more remain pretty high at 77.8 percent."(snip)
with a real financial explanation for the Hindenberg Omen's apparent accuracy ...
(snip)"Here is why: A huge percent of NYSE stocks are financials, banking firms, and include firms such as General Electric which is essentially a financial firm, although many people would not think of them that way. Financial firms hold substantial positions in bonds. Almost every bank listed on the NYSE carries a fixed income bond portfolio somewhere between 15 and 30 percent of their entire balance sheet, and have for years, going back far beyond the past 25 years of our research, a period of time when the Hindenburg Omen worked just fine, thank you very much. Bond and other fixed income products are prevalent throughout the distribution of companies listed NYSE, and have been for years. This Omen has worked for at least the past 25 years. It accurately called the stock market crashes of 2007 and 2008 when the NYSE included many stocks holding significant positions in fixed income instruments. It does not matter. Our entire economy has essentially moved from a manufacturing base to a financial base. This makes the Hindenburg Omen relevant. We believe it would be unwise to ignore this potential stock market crash warning."(snip)
Re: Friday the 13th and the Hindenburg Omen ...
and the 'hits just keep on comin' ' ...
(snip)"An Update on the Hindenburg Omen of August 2010
By: Robert McHugh | Sun, Aug 29, 2010
You are not going to believe this, but on Friday, August 27th, we got both a fifth official Hindenburg Omen observation and a 90 percent up day. Completely bizarre combination, which is the point. It is this sort of confrontational confusion inside markets which is the basis and background for all of the stock market crashes over the past 25 years. This does not mean we are definitely going to get a stock market crash, but it does mean the odds of getting one are far greater than the normal less than one-tenth of one percent on any given day. Because this set-up is rare, only 27 such set-ups over the past 25 years, it throws the market into a unique and infrequent population of only 27 occurrences, and within that unique 27 occurrence set-ups, we have seen a market rattling stock market crash 8 times, or 30 percent of the time this unique set-up occurred. The time span for this set-up is 120 days, 120 days of high risk. The market lacks uniformity, lacks certainty, lacks its normal stability. There were no instances over the past 25 years when a stock market crash occurred without an official Hindenburg Omen being on the clock. We now have a five observation Hindenburg Omen cluster.
First, let's give the details on the latest and fifth Hindenburg Omen, which ironically arrives on a day when the Industrials rose 165 points, not the sort of day one would expect to see a Hindenburg Omen observation. There were 141 New NYSE 52 Week Highs (and by the way, coming on a day when U.S. Bonds tanked), with 74 New NYSE lows. The lower of the two came in at 2.36 percent of total NYSE issues traded Friday, which was 3,140. New Highs were not more than twice New Lows, the McClellan Oscillator was negative (-48.34), and the 10 Week Moving Average was Rising.
As for the 90 percent panic buying up day Friday, there is an amazing phenomenon going on since the April 26th, 2010 top. We have now had twelve 90 percent panic buying up days and thirteen 90 percent panic selling down days since that top. That is, 25 out of the past 87 trading days have been panic trading days, with an approximate equal number of up versus down. This is astonishing.
What does this mean? Pretty much the same thing as the confirmed and official Hindenburg Omen observation means, that the market lacks uniformity, that the market is in an unstable condition, and it is at these times that markets are especially vulnerable to a stock market crash. Again, this does not guarantee a crash, as the odds are only about 30 percent, but compared to the normal less than one-tenth of one percent probability for a crash on any given day, that is an astronomical increase in the odds for a crash. A 90 percent up day occurs when both up points and up volume are above 90 percent of total volume, with the converse being true for 90 percent down days. These are usually rare, but the incidences since April 26th, 2010 have been anything but rare. We get one on average every fourth trading day.
That said, if you are a high stakes gambler, there is a 70 percent chance we will not see a full-blown crash over the next three and a half months (120 days from the first observation, August 12th, 2010). But there are higher odds that a large and significant decline could come over this period, even if it falls short of a crash. The odds of a decline of 10 percent or more are 40.8 percent; the odds of a decline 8 percent or greater are 55.6 percent; and the odds of a decline greater than 5 percent are 77.8 percent -- pretty high. Since August 12th, 2010, the date of the first observation, the Industrials have fallen 3.7 percent, and since the second and cluster-confirming observation on August 20th, the Industrials have fallen 2.7 percent. But there is a long way to go before the threat period ends.
On page 16 and 17 in this Weekend's Expanded Market Report we show that the large Head & Shoulders top patterns from November 2009 have now completed in the S&P 500 and NDX, prices having fallen to the necklines. This increases the odds that a stock market crash is slowly developing and will have an acceleration point over the next several months. Why? Because to reach the downside price targets would require a decline greater than 15 percent, actually greater than 20 percent from the top of the right shoulders."(snip)
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Re: Friday the 13th and the Hindenburg Omen ...
and yet another doom and gloom prediction posted by Melonie fails to occur
Re: Friday the 13th and the Hindenburg Omen ...
(snip)"Lets take a look at what happened the last time the signal was triggered, Thursday August 12th 2010. We were right in the middle of the summer doldrums, and investors were still shaking off the after effects of the flash crash.
Around that time, the S&P 500 looked like it was ready to fall off a cliff. The benchmark index had already slipped 50 points in three trading sessions.
Two weeks later, by August 26th, the S&P was another 40 points lower.
The bears were out in full force, ready to declare victory. But The celebration was short lived. Just five days later, the equity markets confirmed a new intermediate-term bottom, and never looked back.
At first glance, you may want to write this one off as worthless Voodoo. However, one must always keep an open mind and evaluate the market with sound objectivity. Remember, there is no holy grail when it comes to investing, no method is perfect. While I may be skeptical of the Hindenburg Omen's accuracy, I won't throw it away.
Why? Because the signal is only generated in a very specific type of market environment. Rising index prices, lots of new highs, and new lows, and deteriorating internal breadth. While this may not always lead to a new bear market or intermediate-term downtrend, its still an objective method to identify a conflicted market.(snip)
and by 'sheer coincidence' the FED made this announcement at the exact point where markets turned upwards ...
(snip)"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.
The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."(snip)
^^^ in other words, the FED made an official announcement that they would accelerate their rate of money printing / quantitative easing ... which they indeed proceeded to do at a record pace, and are still doing ! Much of this newly printed money then went straight to the US stock markets via the prop trading of fed member banks.
My point, of course, is that all technical indicators ( of which Hindenburg is just one out of many ) assume that basic underlying market conditions will remain stable. The US FED printing up hundreds of billions of freshly printed ( future US taxpayer ) dollars for the express purpose of pumping up US stock markets can hardly be considered a stable market condition. In fact there is another market predictor that applies to this situation ... 'Don't Fight the FED'.