Thursday

4th Hindenburg Omen 25th August 2010

Post a Comment August 26, 2010 – 12:48 pm |   | Permalink |  Print This Post |

We got a fourth Hindenburg Omen yesterday. A few frequently asked questions about the Hindenburg Omen:

Question 1. Does having more confirmed signals in a cluster predict a bigger fall?

Looking back, it does not appear that having more HO omens have any predictive value to the degree of the fall. What that means is any confirmed Hindenburg Omen (ie TWO independent signals) can fall by a greater degree compared to a cluster of 4,6,10 or more. Note that in all our “answers” there is insufficient statistical power to be certain since the numbers are very low. We have only had 27 Hindenburg Omens since 1985.

Question 2. Does having more signals increase the likelihood of having a crash?

It appears that having more signals does increase the chance of a crash. Hindenburg Omens are a sign of an unhealthy market, so the more you have, the market is telling you that something bad is brewing. Here is a chart from highgrowthstock.com:

hindenburg-omen-chart