Saturday, August 14, 2010

Oh, the Humanity!

As if unemployment and a double-dip recession weren't enough, we must add the Hindenburg Omen to the list of economic worries:
The Omen, named after the famous German airship in 1937 that crashed in Lakehurst, N.J., is a technical indicator that foreshadows not just a bear market but a stock-market crash [bold added]. Its creator, a blind mathematician named Jim Miekka, said his indicator is now predicting a market meltdown in September.
According to the WSJ the Hindenburg Omen criteria are the following:
  • The daily number of new NYSE 52-week highs and the daily number of new 52-week lows must both be greater than 2.5% of the total issues traded that day.

  • The smaller of the 52-week highs and lows must be greater than or equal to 79 (or 2.5% of 3,168 issues).

  • The NYSE's 10-week moving average must be rising.

  • The McClellan Oscillator, a measure of market fluctuations, must be negative.

  • New 52-week highs can't be more than twice the new 52-week lows. (However, it is acceptable for the new 52-week lows to be more than double the 52-week highs.)

  • The Hindenburg Omen formulas seem like a black box, if not black magic, to me. The trouble is, the HO does confirm another stock market warning sign that I like to track.

    The skirts are falling! The skirts are falling!

    Despite the ominous omen, I'm hoping that the August heat wave will trigger a bounce in hemlines and share prices. In other words I'm hoping to see a bottom soon.

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