Hindenburg Omen Crash Prediction

What is the Hindenburg Omen ?

Are the stock markets about to crash again? Not long ago there was talk of the Death Cross that was forming on the stock charts in the DOW and S&P, so far that crash hasn't happened, although it still might. But now there is talk of a far worse scenario, that is signalled by the occurrence of the ominously named Hindenburg Omen.

The Hindenburg Omen is a technical indicator named after the airship that crashed so spectacularly in 1937.

There are five factors to be taken into account when deciding if there a Hindenburg Omen is being formed.
Video explanation of the Hindenburg Omen


According to some the Hindenburg Omen is the technical pattern that is the most feared by bullish chartists  ..... it is a technical signal that often predicts an upcoming stock market crash.  It is, however, not a guarantee of a crash, the five criteria required the Hindenburg Omen need to reoccur within 36 days for confirmation. The statistics are neverthless compelling - "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 last time we saw a Hindenburg Omen was during the lows of 2009. Today, we just had another (unconfirmed) Hindenburg Omen. They then add "It is time to batten down the hatches - something big is coming. " Personally I don't call a 5% drop "something big".

What is the Hindenburg Omen ? There are  5 criteria required for the Hindenburg Omen  :-

1. The daily number of new 52 Week Highs on the NYSE and the daily number of new 52 Week Lows must be greater than 2.2% of total NYSE issues traded that day.
2. The smaller of these numbers must be equal to or greater than 69 (68.772 is 2.2% of 3126). Not a hard and fast rule, more like a checksum. This condition is a function of the 2.2% of the total issues.
3. The NYSE 10 Week moving average must be rising.
4. The McClellan Oscillator must be negative on that same day.
5. The new 52 Week Highs cannot be more than 2 x new 52 Week Lows. This is an essential condition.

All 5 conditions were satisfied over the last couple of days. This also happened back in June 2008 and Barron's said at the time "there's a 25% probability of a full-blown stock-market crash in the next 120 days." It appears also that the Hindenburg Omen has been present just before all the market sell offs of the last 25 years.

For the Hindenburg Omen to be effective according to the experts, it must appear at least twice, and up to five times within a 36 day period. The subsequent market collapse needs to take place within a 120 day time frame.

According to said Albert Edwards, strategist at Societe Generale SA, the Hindenburg Omen may suggest that “a savage equity downturn is imminent..... Equities are tottering on the edge as increasingly recessionary data becomes apparent. It would not take much to tip them over that edge.”

According to NASDAQ.com the Hindenburg Omen occurred for the second consecutive day yesterday, which confirms the signal that the market is likely to have at least a 10% correction in the next few months.

So the indicators seem to be indicating a downturn, but 5% or 10% does not seem to me to represents a "crash".

If you know nothing about stock market charting and wonder why indicators such as the Hindenburg Omen are considered important by technical analysts then check out stock trading for beginners

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