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Whatever Happened To All Those Hindenburg Omens?

  • Written by Syndicated Publisher No Comments Comments
    October 17, 2013

    Back in August, well-known market analyst Marc Faber was calling for an 1987-style crash and said the markets would drop 20% (click for video link). Also during that time, the financial media was all worked up by “Hindenburg Omens” popping up repeatedly during the month (see Hindenburg Omen Hovers Over Wall Street Again). A short description of the frightening market-event is provided below from Wikipedia. Named after the famous Zeppelin airship that exploded in a disastrous fire…

    The Hindenburg Omen is a combination of technical factors that attempt to measure the health of the NYSE, and by extension, the stock market as a whole. The goal of the indicator is to signal increased probability of a stock market crash.

    At the time, I wrote two articles showing how market internals were still bullish and did not support the pessimistic view:

    In both articles I tried to examine market data to see if there was a major market top forming, and digging into the details provided no context with which to call for a crash or bear market. For example, in my August 14th article I made the following observation:

    So, while the new 52-week highs and lows were relatively close in number, their makeup was very different as new highs were dominated by larger cap operating-only companies while new lows were dominated by fixed-income closed-end funds and very small companies. Additionally, I do not believe the May cluster nor the present cluster of Hindenburg Omens will prove to characterize a market top as new 52-week highs continues to dominate new lows…completely unlike what we saw in 2007.

    We are now two months past those calls for a crash and the small cap Russell 2000 Index stands at an all-time high as does the mid cap S&P 400 Index, with the large cap S&P 500 only 8 points away from hitting another all-time new high.

    When looking at the makeup of new 52-week highs and lows for the S&P 1500 (1500 total companies from small cap to mid-cap to large cap) we see that the bulls continue to hold the reins as spikes in 52-week highs during rallies trumps spikes in 52-week lows during declines.


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About The Author – Chris Puplava, Financial Sense Online

Chris graduated magna cum laude with a B.S. in Biochemistry from California Polytechnic State University, San Luis Obispo. He joined PFS Group in 2005 and is currently pursuing the designation of Chartered Financial Analyst. His professional designations include FINRA Series 7 and Series 66 Uniform Combined State Law Exam. He manages PFS Group’s Precious Metals Managed Account, Energy Managed Account, and Aggressive Growth Managed Account. Chris also contributes articles and Market Observations to Financial Sense and co-authors In the Know—a weekly communication for Jim Puplava’s clients only—with other members of the trading staff. Chris enjoys the outdoors.