The Hindenburg Omen
by Goerge Uri
A number of market technical letters have been forwarded to me in the
past couple of days reporting that a very rare technical confluence called
the Hindenburg Omen has appeared in the markets having been confirmed with
Monday's action. The Wikipedia write up goes like this:
The traditional definition of a Hindenburg Omen has five criteria:
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.
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)
That the NYSE 10 Week moving average is rising.
That the McClellan Oscillator is negative on that same day.
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.
These measures are calculated each evening using Wall Street Journal
figures for consistency. The occurrence of all five criteria on one day is
often referred to as an unconfirmed Hindenburg Omen. A confirmed
Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur
during a 36-day period from the first signal.
Getting ahead of events, as I forget and do every once in a while -
being often accused of living about 10-minutes in the future anyway, you
may wish to click back to the May 21 report where I laid some of the
groundwork for the problem at hand under the headline (a little more than
a third of the way down the page) "$130 Oil: Meantime Here on the
Hindenburg". I don't usually quote myself, but let's see how the following
looks now that the Hindenburg Omen has appeared:
"The Fed now finds itself between a rock and a hard place: On the one
hand we need to have lots of liquidity in the financial system, and so
instead of demanding high quality assets to back up borrowing at the Fed's
discount window, it's 'bring whatever you have' that would otherwise send
honest accountants scurrying fleeing for fear of prison terms.
Source: http://www.urbansurvival.com/week.htm |