Saturday, August 14, 2010
Oh, the Humanity! The Hindenburg Omen in the Stock Market
Sometimes technical indicators seem named just to see how much fear they can provoke.
Take the "Hindenburg Omen," an indicator that depends on a number of variables that was triggered on Thursday in the stock market, portending a sharp correction in coming months.
Named after the zeppelin disaster that took place over Lakehurst, N.J., in 1937, the pattern is a "rare but potent" sell signal, said Jay Shartsis, director of option trading at R.F. Lafferty & Co.
For this to be activated, it requires at least 2.2 percent of the market to reach new 52-week highs and 52-week lows on the New York Stock Exchange on the same day, which happened Thursday, suggesting a lack of conviction among investors. (more)