Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Hindenburg Stock Market Omen Doomed to Crash and Burn?

News_Letter / Financial Markets 2010 Aug 26, 2010 - 03:01 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter
August 22nd, 2010 Issue #48 Vol. 4


The Market Oracle Newsletter
August 22nd, 2010            Issue #48 Vol. 4

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

The Hindenburg Stock Market Omen Doomed to Crash and Burn?

Inflation Mega-Trend Ebook Direct Download Link (PDF 3.2m/b)

Dear Reader

The dreaded Hindenburg Omen (HO) has been making the rounds in the mainstream press and BlogosFear for the past few weeks, which purportedly heralds an imminent stock market crash.

Hindenburg Seller: Market Oracle Checks Out - Barrons - 21st August 2010

ES MIEKKA, A BLIND ORACLE credited as the author of the Hindenburg Omen, a predictor of stock-market crashes that has been getting a lot of buzz, sold his stock positions last week.

The Omen was triggered Aug. 12, when new 52-week highs and lows exceeded 2.5% of issues traded on the New York Stock Exchange, the 50-day moving average rose and three other factors confirmed a confused market. It happened again on Friday, he says.

Hindenburg Omen' Indicator Suggests Slump in Stocks: Technical Analysis - Bloomberg - 13th August 2010

This week’s plunge in U.S. stocks triggered a technical indicator known as the Hindenburg Omen that may signal a more severe sell off, according to analysts who follow charts to predict market moves.

Dr Doom on stock markets, the Hindenburg Omen and what next - FT - 31st July 2010

“Normally a single signal is not of great significance, but when several signals occur within a short period of time, the odds for a stock market crash increase”, says Faber.

As of Tuesday, July 23, the Hindenburg signal had fired at least eight times over the previous six weeks. The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market and warns of either impending market crashes or severe declines.

Do you notice that the HO is apparently more common than the theory suggests it should be? Which implies that it is overly complicated and highly subjective rather than technical as illustrated by Marc Faber's comments of several Hindenburg events in July.

What Exactly is the Hindenburg Omen Indicator?

The criteria for the Hindenberg stock market crash omen are -

1. The Number of NYSE 52 week New Highs and Lows are both greater than 69

2. New highs cannot be more than double the new lows

3. Rising 10 Week NYSE Index Moving average

4. A negative Mcclellan Oscillator on the same day.

That the HO should be repeated within 36 hours to confirm a signal, else it is an unconfirmed HO.

This month (August 2010) has seen three occurrences of the HO, first on the 12th (unconfirmed HO), then on the 19th and again on the Friday the 20th with 83 New highs and 95 New lows thus confirming the HO and signaling an imminent crash.

My View - If you have been following my analysis / commentary for any length of time then you will know that I consider all individual tools, indicators and theories as no more reliable on their own than a coin toss i.e. a 50/50 probability, and therefore it should be the job of the analyst to pull all the threads together towards a arriving at a probable final conclusion.

The problem I see with the Hindenberg Omen and its kind is that it is too easy to generate a back fitting indicator that perfectly calls every top or bottom in hindsight but going forward requires constant revisions to make the indicator fit onto future price action, which basically means you have a 50/50 chance (or less) of the indicator going forward producing the outcome that it purports to forecast, as each time it fails the indicator is changed to allow for the reason as to why it failed which basically means fewer and fewer occurrences which does NOT mean that it becomes more accurate rather more accurately fitting the data in hindsight.

To effectively use the HO, it must be part of broader unbiased analysis as the biggest mistake analysts make is by attaching near certainty of outcome to an indicator that then clouds their judgement at arriving at a more probable conclusion. So the HO is no better or worse then any other technical indicator and should be treated as such rather then to be elevated to a level that generates headlines of imminent stock market doom. Given the fact that the HO's are rare this to me suggests that it is pretty much worthless as it does not allow for the build up of experience of using the indicator along with all other analysis on an going basis. It is infinitely better for analysts or traders to train themselves to use simple trendlines than waste time on tracking once in a blue moon indicators such as the HO.

Also remember that stock market crashes are extremely rare and near impossible to forecast events as illustrated by the long history of failure, remember October 2009? That was supposed to have witnessed a repeat of Black Monday that NEVER happened. Whilst the May 6th Flash Crash was missed by ALL.

The facts are that the main proponents of the Hindenburg Omen have been WRONG throughout the WHOLE Bull market from its birth in March 2009 and subsequent 18 month trend, the perma-bears each month jump from indicator to indicator (In June and July the Head and Shoulders pattern was all the rage) all the while hoping all the past investment account busting wrong calls have been forgotten as they wait to eventually be right, even a broken clock is right twice a day.

Stock Market Trend

Last weekends quick stock market analysis (15 Aug 2010 - Central Bankers Stoking the Inflation Fires, Whilst Academic Economists Worry about Deflation ) concluded in expectations for the Dow to target a trend towards 10,100 for a possible low after failing to hold 10,700. This week the Dow closed down at 10,213, and put in a fresh low at 10,147. Considering the prevailing HO bearishness of the past 48 hours which could have limited negative impact on the market next week, the Dow could now trade down into the 10,000 to 10,100 zone. I am looking at the chart and its not showing anything other than remaining within a tight corrective trading range of between 10,700 and 10,000.

The risks to the scenario remains of a break below 10k to target 9,614 low a break of which would imply a larger ABC pattern that targets a downtrend into October (current scenario is that the early July marked the ABC correction low to target 10,700 then 11,250). So unless I see a breakout form the tight range, I still don't see the point of taking the time to do an in-depth analysis at this point.

Pakistan Floods Crisis Worsens

The floods crisis in Pakistan has now put 20% of the country under water with the number of people affected expanding to 20 million from 14 million. The growing risk is that from the outbreak of water bourne diseases such as cholera that could see the death toll multiple into the tens of thousands unless urgent action is taken. Looking beyond the floods, Pakistan's already war and recession weakened economy lies in tatters that risks political and social instability which could spill over into neighbouring countries.

UK Donations

USA Donations

Your analyst.

Comments and Source: http://www.marketoracle.co.uk/Article22092.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Featured Analysis of the Week

PRESERVE and PROTECT Mapping the Financial Markets Tipping Points - 21st Aug 10 - Gordon_T_Long
Climate Change Scientists and Politicians Concocting the Consensus View - 21st Aug 10 - Andrew_G_Marshall
U.S. Military Intervention in Africa, The New Blueprint for Global Domination - 21st Aug 10 - Paul C. Wright

Deflation Report

The Myth of the Engineered Recession - 21st Aug 10 - Gary_North
Inflationary Catalysts Pushing Gold Stocks Higher - 20th Aug 10 - Joe Foster
Silver Seasonal Big Autumn Rally - 20th Aug 10 - Zeal_LLC
The U.S. Econonomies Future
Double Dip Recession Proof Stocks - 20th Aug 10 - Jason Simpkins
How Washington Should Handle the Bush Tax Cuts - 20th Aug 10 - Martin Hutchinson
America’s Healthcare Mafia Strikes Again - 20th Aug 10 - Mike_Stathis
Buy and Sell Gold On-line Securely
Protection From a Double-Dip Economic Recession Going Global - 19th Aug 10 - Jason Simpkins
U.S. Heading for Currency Destruction Debt Default Great Depression - 19th Aug 10 - Doug Casey
Are Stocks a Screaming Buy Relative to Bonds, or a False Premise ? - 18th Aug 10 - Mike_Shedlock
Stock Market Crash Report - FREE
Affording the Unemployed - 18th Aug 10 - J_M_Finegold_Catalan
Gold and Other Investor Protections Against a Double Dip Recession - 18th Aug 10 - Jason Simpkins
U.S. Bank Credit Increases a Healthy 8.3%, But One Month Does Not Make a Trend - 18th Aug 10 - Paul_L_Kasriel
Get Your Free 50-Page Download: The Ultimate Technical Analysis Handbook
Recession Batters State Budgets Which Could Slow Economic Recovery - 17th Aug 10 - Elizabeth McNichol
The Connection Between Debt and Money Under Fractional Reserve Banking - 16th Aug 10 - Robert_Murphy
Emerging Stock Markets Thrive as U.S. Shares Tumble - 16th Aug 10 - Jon D. Markman
Buy and Sell Gold On-line Securely
Stocks Distributing Into Weak Hands, Politicians With the Worst of Intentions - 16th Aug 10 - Steve_Betts
Time for a New, New Deal? - 15th Aug 10 - PhilStockWorld
Russian Wildfires Highlight the Global Population Growth-Food Supply Crisis - 15th Aug 10 - Matthew Weinschenk
U.S. Housing 10% Below Fundamentals, BubbleOmics Says Must Drop 15% More - 15th Aug 10 - Andrew_Butter
Stocks, Housing and Economy, Mass Delusion American Style - 14th Aug 10 - James_Quinn
Double Dip Recession, Keynesianism Is Dying - 14th Aug 10 - Gary_North

Most Popular Financial Markets Analysis of the Week :

1. U.S. Heading for Currency Destruction Debt Default Great Depression

By: Doug Casey

As the world sinks deeper into what he calls the Greater Depression, Casey Research Chairman Doug Casey sees default on the U.S. national debt as inevitable—albeit probably in the guise of currency destruction. He anticipates further contraction in real estate, particularly on the commercial front. As long as stocks remain overpriced, he'll shy away from equities—except perhaps in favored sectors such as gold. In fact, in this exclusive interview with The Gold Report, Doug posits that gold juniors might "go up by an order of magnitude or more, even while most other stocks are going down."

Read Article

2. Central Bankers Stoking the Inflation Fires, Whilst Academic Economists Worry about Deflation

By: Nadeem_Walayat

This week the Bank of England Governor Mervyn King realised that his attempts at talking inflation down have failed and that now 8 months on he is looking rather foolish by continually stating that high inflation is just temporary, where even the mainstream press that had been lapping up the mantra are now no longer taking him seriously, so now the Governor is suggesting that inflation will remain above the 2% target level for the whole of 2011 (current CPI 3.2%, RPI 5%) which translates into watch for UK CPI to go above 4% and and RPI above 6% during 2011, in line with my expectations since early May.

Read Article

3. Time for a New, New Deal?

By: PhilStockWorld

What are people thinking?
It is interesting to see so many of the same people calling for a "double dip" recession while at the same time railing against government spending.  The US Government is spending $3.5Tn this year.  Admittedly that's $1.5Tn more than they have, but it's quite a lot of money no matter how you look at it.  Conservative, born-again deficit hawks (they were born-again the day Obama was elected) will tell you the solution is to cut taxes and let corporations trickle their wealth down on the bottom 99%, well over 20% of whom are unemployed or under-employed.

Read Article

The U.S. Econonomies Future

4. Stock Market to Plunge to Below Dow 9000 by November 2010

By: Larry_Edelson

My apologies for being so bold in the subject line. But this is one of the most important columns I’ve ever written. Why? Because today I am going to give you a major heads up on the trends I see unfolding over the next few months.

Read Article

5. The Connection Between Debt and Money Under Fractional Reserve Banking

By: Robert_Murphy

Is Our Money Based on Debt?

Different groups often notice different aspects of the same phenomenon — this is the point of the famous tale of the blind men encountering an elephant. When it comes to the Federal Reserve, Austrians usually focus on how its tinkering with interest rates leads to the boom–bust cycle.

Read Article

6. Protection From a Double-Dip Economic Recession Going Global

By: Jason Simpkins

The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

That 1981-82 double-dip downturn - the result of an economic "shock treatment" aimed at curing those ills - consisted of two recessions that were separated by a single quarter of growth.

Read Article

7. U.S. Housing 10% Below Fundamentals, BubbleOmics Says Must Drop 15% More

By: Andrew_Butter

From Felix Salmon today: The government does need to get the housing market going, because the alternative is unthinkable: if the government just kicked away the housing market’s multi-trillion-dollar scaffolding overnight, as Santelli suggests it should, then the entire banking system would become insolvent, and we’d soon be reminiscing wistfully about how painless and shallow the 2008 financial crisis was, compared to the one of 2011

Read Article

8. Stocks Distributing Into Weak Hands, Politicians With the Worst of Intentions

By: Steve_Betts

Ancient Rome declined because it had a Senate, now what's going to happen to us with both a House and a Senate? - by Will Rogers, humorist

Housing foreclosures hit new highs last month as the hangover from the housing bubble continues. It is estimated that 32% of all mortgages now have negative equity, meaning the debt on the house exceeds the value of the house. So here’s a question: if you bought a house for US $400,000, you have a mortgage on it for $350,000, and it’s worth US$ 225,000, what is the proper business decision to make? I’m not talking about the moral dilemma here; I am simply looking at it as a business decision.

Read Article

Subscription

You're receiving this Email because you've registered with our website.

How to Subscribe

Click here to register and get our FREE Newsletter

To access the Newsletter archive this link

Forward a Message to Someone [FORWARD]

To update your preferences [PREFERENCES]

How to Unsubscribe - [UNSUBSCRIBE]

About: The Market Oracle Newsletter

The Market Oracle is a FREE Financial Markets Forecasting & Analysis Newsletter and online publication.
(c) 2005-2010 MarketOracle.co.uk (Market Oracle Ltd) - The Market Oracle asserts copyright on all articles authored by our editorial team. Any and all information provided within this newsletter is for general information purposes only and Market Oracle do not warrant the accuracy, timeliness or suitability of any information provided in this newsletter. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We recommend that independent professional advice is obtained before you make any investment or trading decisions. ( Market Oracle Ltd , Registered in England and Wales, Company no 6387055. Registered office: 226 Darnall Road, Sheffield S9 5AN , UK )

Terms of Use | Privacy Policy

Copyright 2010 MarketOracle.co.uk

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules