The 'Hindenburg Omen' Is Seen. Will a Stock Crash Follow?

stock marketWall Street is whispering about the "Hindenburg Omen." It's an ominously named technical indicator that is supposed to signal an upcoming stock market crash. "Its creator, a blind mathematician named Jim Miekka, said his indicator is now predicting a market meltdown in September," reports The Wall Street Journal.

The S&P 500 completed on Friday the biggest three-day decline since July 1. The wobbly stock market has investors worried and searching for clues on the market's direction.

Doom or Drinking?

Some traders are warning clients about the indicator, and some blogs are all doom and gloom. The indicator may suggest "a savage equity downturn is imminent," Bloomberg quotes Albert Edwards, a London-based strategist at Societe Generale SA, as saying.

But the Journal cites Andrew Brenner, managing director at Guggenheim Securities, telling his clients: "Personally, it sounds like [people] are starting their weekend drinking early."

According to the Journal:
The confluence of data used by the Omen was officially tripped this week. There were 92 companies that hit new 52-week highs on Thursday, or 2.9% of all companies traded on the New York Stock Exchange. There were also 81 new lows, or 2.6% of the total. Each number must exceed 2.5% for the Omen to occur, according to Mr. Miekka. Other criteria include a rising 10-week moving average for NYSE and a negative McClellan Oscillator, a technical indicator that measures market fluctuations.

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."

When the publication asked Omen creator Miekka if investors should bail out of the market now, he replied: "I'll be dancing close to the door."

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j0shwerk@yahoo.com

It is my belief that if enough people believe in something, like a double-dip recession or the Hindenburg Omen, their belief can cause it to happen. That, plus some very real bearish news lately, caused me to write: Hindenburg Omen: Myth, Reality, or Both? http://prooftrader.com/symbol/QID/643/Hindenburg-Omen-Myth-Reality-or-Both

August 26 2010 at 10:36 AM Report abuse rate up rate down Reply
bsmithanza

The stock market may not crash, but it certainly isnt going anywhere. No segment or business in any economy exists in a vacumn. This economy is in the toilet so any dramatic increase in the stock market is unstainable. We just did this with housing where it went up redicilously high as if was detached from the rest of the economy and the inevitable happened and it came down. With the advent of the computer, and the loss of jobs, we now have tons of people out there day trading as a business, running the stock market up and down, eeking out marginal returns on whatever they can, because they have to...its their job now. The stock market cycles now have little relationship to the real world...its just a more exspensive video game. The market should hang in there around 9-10k and wont solidly rebound until the rest of the economy starts getting a pulse

August 18 2010 at 11:30 AM Report abuse rate up rate down Reply
Fred

Well, Glenn Beck said the Hindenburg predicts a drop (he said "crash") of 5 %. Good grief, that's only, what, about 5-600 off the DOW? We've seen far worse in the last few years and had 600 in May. The DOW has been fluxuating 2-400 points regularly ~ 600 again wouldn't really bother many anymore.

August 16 2010 at 11:48 PM Report abuse +2 rate up rate down Reply
Fred

Well, Glenn Beck said the Hindenburg predicts a drop (he said "crash") of 5 %. Good grief, that's only, what, about 5-600 off the DOW? We've seen far worse in the last few years and had 600 in May. The DOW has been fluxuating 2-400 points regularly ~ 600 again wouldn't really bother many anymore.

August 16 2010 at 11:47 PM Report abuse +1 rate up rate down Reply
robmowrer

You know if you predict a stock market crash every week or month or year you will eventually be correct. One out of four isn't impressive.

August 16 2010 at 8:35 PM Report abuse +1 rate up rate down Reply
annedyth

Someday the market will go down and stay down....Probibly soon.

August 16 2010 at 7:03 PM Report abuse +2 rate up rate down Reply
htk1915

To all who read this, understand, that God so loved the World, that He gave us His Word, He fulfilled His promises, and will contiue to do so, some of the investors in the market are good God fearing Christians, that give more away that keep for themselves, they help the poor and needy, and such, and these are the ones that God will keep the market alive for, Just like God promised to Abraham, not to destroy Sodom and Gomorrah if there be just ten rightous in the town, So the question I have for all viewers of this message, Do you think that there are at least 10 righteous people in the market? Ask for God's wisdom in the matter of those who would speak doom and gloom over the market, they will reap what they are sowing, and to those who know better and have just a little bit of faith in a Big God, give and it shall be given unto you, please Him your words of faith. Mb

August 16 2010 at 12:52 PM Report abuse +1 rate up rate down Reply
1 reply to htk1915's comment
reinventex101

I thought God so loved the world he gave his only begotten son. Hmmm! Maybe I got hold of a misprint.

August 17 2010 at 7:18 AM Report abuse +2 rate up rate down Reply
htk1915

A crash and major downturn it likely, just like a jet plane flying across the sky, would be in danger of crashing if no one did anything to fly her, the economy has been on auto pilot long enough, lets fly the plane and let fly her with Gods word, lets use our faith and speak to the market and in agreement with Gods promises and Words of promise, lets command it to stand still, and only move forward, and up. If you do not have faith in Gods word, that is ok, you can, you can still see the result, and you can still reap some of the blessings. Mb

August 16 2010 at 12:35 PM Report abuse +1 rate up rate down Reply
skip690009

I believe the market will eventually crash. Our economy is capitalist, and by switching to a socialist form of government the crash is inevitable. Socialism does not work due to corruption that is inherent in that system. Congressional corruption we currenlty have will only exacerbate the problem.
We have to figure this out. The capability to correct this problem lies in the public actions which can cause the following to begin to correct this problem:

1. Term limits (2) for any elected government office.
2. Eliminate the fat cat congressional retirement system. They go on social security with the rest of us. Then they will be motivated to fix that system.

This will start to correct the problem. Bur more good ideas are needed before it is too late.


Norman Prevatte

Fredericksburg, VA

August 16 2010 at 11:23 AM Report abuse +8 rate up rate down Reply
1 reply to skip690009's comment
jiregalado

One of my favorite candid snaps is a pic of protesters on Wall Street during of of the "corrections ...

The individual is holding a sign that reads:

"JUMP YOU F***ERS!

August 16 2010 at 11:12 AM Report abuse +3 rate up rate down Reply