From last week, from Friday the 13th in fact, US equity investors have been talking about the Hindenberg Omen. The Hindenberg Omen is named after the events of 1937 when the zeppelin airship Hindenburg dramatically exploded into flames in New Jersey. The Hindenberg Omen refers to a list of five separate indicators linked to the New York Stock Exchange which when they occur at the same time, have historically warned of an impending crash.
Last week, the Zero Hedge blog told us the Hindenberg Omen is upon us because the five signs are already there:
1. The daily number of NYSE new 52 Week Highs and the daily number of new 52 week lows must both be greater than 2.2 percent of total NYSE issues traded that day.
2. The smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126)
3. That the NYSE 10-Week moving average is rising.
4. That the 'McClellan Oscillator' is negative on that same day. (This is a market breadth indicator used by NYSE analysts to evaluate how much money is flowing in or out of the market on any given day.)
5. That new 52 week highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 week lows to be more than double new 52 week highs).
But then, The Wall Street Journal says that the Hindenberg Omen might just be a whole lot of hot air. Market analysts say it has foreshadowed 20 of the last four crashes. Only about 25% of Omen appearances have led to stock-market declines that can be considered crashes.
We'll know more in the next few days. Don't say you haven't been warned.