Tags: hindenburg | omen | stock | market

Hindenburg Omen: Will Crash Triggers Sink Recovering Stock Market?

Image: Hindenburg Omen: Will Crash Triggers Sink Recovering Stock Market?

Tuesday, 13 Aug 2013 05:02 PM

By Morgan Chilson

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Calling a group of technical factors that predict stock market trends the “Hindenburg Omen,” which practically screams crash and burn, is enough to make any investor sit up and pay attention.

Knowing that a cluster of Hindenburg Omens (HO) have occurred recently is even more cause for concern, said CNBC.

Although some call the idea that HOs can predict an upcoming market tailspin ridiculous and even use the term “folklore,” there are still plenty who pay attention when those omens are triggered.

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CNBC said the most common HO is when an “unusually high number of stocks on the New York Stock Exchange hit 52-week highs and lows,” and added that other HO elements include a NYSE index that’s higher than 50 days ago and new highs that are less than new lows. (For more on this complicated formula and what the Hindenburg Omen is, check out Investopedia.)

MoneyNews reported that Art Cashin, director of floor operations at UBS, indicated in his blog that there have been multiple HOs in the last few weeks.

And the Wall Street Journal reported the HOs of impending doom, as well, in a blog post titled, “Why Hindenburg Omen Matters Right Now.” The writer reported a cluster of five HOs that have occurred in the past few weeks, as reported by Jason Goepfert, founder of Sundial Capital Research.

“That’s a heavy concentration that we haven’t seen too many other times over a span of nearly 50 years,” the Journal quoted from a Goepfert report. “And when we have, it hasn’t been good.”

The article included an accompanying chart that highlighted past instances of HOs and the resulting impact on the S&P 500. The most recent occurrence of five HOs that happened within a two-week time period was in November 2007, and within six months, the S&P dropped 5.9 percent and within a year, it was down 38.7 percent.

Add HOs to an iffy market environment, and questions about federal policy decisions and investors are getting “jittery,” the Wall Street Journal said.

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Related stories:

Faber: US Stocks May Crash 20 Percent or More By Year’s End

Shiller: Stock Market Showing Bubble-Like Behavior

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