http://ewtrendsandcharts.blogspot.com/2010/08/hindenburg-omen-was-triggered-today.htmlhttp://uk.reuters.com/article/idUKPTIP42198520100813
Apparently the last time the phenomenon occurred was twice in June 2008, and
once a month later. We all know what happened to the stock market that Autumn.
Thursday, August 12, 2010
The Hindenburg Omen was triggered today!!!!
The Omen finally got triggered today, first, a quick refresher of what the
Omen
is:
It is a set of conditions, and rules that when all are met, greatly increases
the odds of a large sell-off, or crash of the markets. In fact no crashes in
the last 22 years have happened, that did not first have a confirmed signal of
a Hindenburg Omen. Just because all the conditions have been might, and it
becomes a confirmed Hindenburg Omen does not guarantee a crash, only greatly
increases the chances of a severe market correction ahead. Another way to
think
about it is without a confirmed Hindenburg Omen in place, Bulls can sleep a
little better at night knowing that most likely they will not awaken to the
market down 10%. In fact the odds of a crash based upon the history since 1985
is 27% chance after two or more signals were confirmed.
The best way to think about it is under normal conditions, there can be large
number of stocks, setting new 52 week highs, or a large number setting 52 week
lows, but not both. Things become out of balance when large numbers of stocks
are setting new highs, and lows at the same time. Having one sector soaring,
and another setting new lows is not good in the balance of a healthy market.
The traditional definition of a Hindenburg Omen is that the daily number of
NYSE New 52 Week Highs and the Daily number of New 52 Week Lows must both be
so
high as to have the lesser of the two be greater than 2.2 percent of total
NYSE issues traded that day.
And that has been updated to include two more sets of conditions to filter out
false readings;
1-That 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-That the smaller of these numbers is greater than 75. (this is not a rule
but
a function of the 2.2% of the total issues) ( as of 7-12-2010, 69 issues are
all that is required for the 2.2% rule!!)
3-That the NYSE 10 Week moving average is rising.
4-That the McClellan Oscillator is negative on that same 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). This condition is absolutely mandatory.
Rules 1 and 2, are pretty much addressing the same criteria, because if you
have 75 issues making new highs/lows, then mathematically, you also have
achieved 2.2%. The numbers of issues fluctuates daily and it is quicker to use
rule number 2. In other words, if condition 2 has been met, then condition 1
will be met by default.
Syafrin Djohan
061-77816890, 081370268888
Go Vegan for the Environment
