Hindenburg Omen Predicts Market Crash

The ominous “Hindenburg Omen” registered yesterday, August 12, on the New York Stock Exchange. The Hindenburg Omen occurs when a number of technical indicators align on the NYSE. It has been a fairly accurate predictor of an imminent stock market crash. However, and this is important, a confirmed Hindenburg Omen requires a second (or more) trigger within the next 36 days. In other words, another alignment of the Hindenburg Omen in the near future will give positive confirmation of a likely imminent steep market decline.

The criteria for the technical indicator are as follows:

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 or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues.

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.

The indicator denotes unhealthy internals in the marketplace, with a large number of stocks making both new highs and new lows. It suggests a lack of internal uniformity in the stock market and, therefore, a much higher than normal probability for a steep decline.

Full story here at benzinga.com.