means that for the next 120 days from May 29th, the Omen is predicting a
greater likelihood of a SIGNIFICANT CORRECTION or a CRASH for STOCKS.
This would put the outer limits of the target date at September
30th….of course, we should know by now that September is usually the
worse month for stocks. Although, the Omen puts the greatest chance of a
hard selloff in the first 40 days, so that would be June or July.
every Omen leads to a deep sell-off….I can think of the last couple that
occurred in 2010 or 2011 and not all that much happened. However, of
the three major crashes or selloffs (1987, 2000 and 2008) of the last
30 years, ALL of them were forewarned by the Hindenburg Omen.
I think the rules of the Omen are a little cumbersome and lacking in
full credibility, what matters is that this signal identifies daily
extreme volatility as an early warning sign of problems cropping up with
equities. For that reason, the Omen seems to have some validity, though
I think the rules should be refined to make it less complicated and
Here’s the details on the latest Omen:
is the chart I maintain all the time on the Public Chart List page at www.StockCharts.com. Of interest, the MACD crossed under zero on Friday, and
though this is NOT a direct detection of the Omen, the down-cross of
the zero line is often a warning of a drop in the NYSE listed stocks is
From the description of the NYHL chart on my Public Charts List at www.Stockcharts.com :
overlooked by investors, the New Highs-New Lows List is an important
barometer for market sentiment. When the index is positive, then
investors tend to be bullish and the market tends to go higher. When the
index goes negative, then the market tends to go bearish. If you are an
investor who wants just one simple sign to tell you whether you should
have your money in the market or out, I recommend the $NYHL as the
simplest, at-a-glance indicator.
As of May 31st, 2013, the index
finished at a positive 255. It has been as high as +878 in 2013 as the
NYSE (and other US indexes) have rallied hard and made lots of money for
the bullish investors. However, on May 29th, a HIndenburg Omen signal
was issued by this index. This is a rather archaic formula that has
called the 1987, 2000 and 2008 market crashes. However, the index has
made a few false warnings over the years too. Suffice to say, it’s crash
signal should at least put investors on heightened awareness over the
next 40 days after the signal (and up to 120 after, though the greatest
likelihood of a deep sell-off should occur within the first 40 days).
I believe the formula for the Hindenburg Omen is rather convoluted and
archaic, its main intent makes sense to me: that is, it measures
extremes on the New Highs-New Lows list and sets off a signal if two
days rather close to each other prove to be very volatile in hitting
news highs and lows.
Also, of immediate interest to me is that
the MACD signal just went under zero on May 31st on the $NYHL. This
negative divergence signal often portends a sharp drop in the $NYHL
within a short amount of time. In other words, investors should be
taking some profits by now and bracing for greater market volatility in
the summer months.