Oh, The Humanity! Hindenburg Omen In Stock Market

[Elmore Furth]

The Hindenburg Omen indicates a higher overall probability of a stock market crash is higher than normal. The signal suggests that the market is likely to achieve at least a ten percent correction in the next few months.

One Hindenburg Omen needs to be confirmed since it has a high false positive rate. A train of 3 to 5 coupled Hindenburg Omens are preferred by analysts.

Hindenburg Omen

I hope there's no 'Black Hole Omen' coming. You can't see astronomical black holes except by their gravitational effects and when they are about to swallow you up.

By REUTERS
Published: August 13, 2010
Filed at 2:02 p.m. ET

CHICAGO (Reuters) - 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, New Jersey, 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 yesterday, suggesting a lack of conviction among investors.

Oh, The Humanity! Hindenburg Omen In Stock Market

[Turbineguy]

1. What does

Nostradamus have to say on it?

[Ghost Dog]

2. It's the Black Spot.

Shiver me timbers.

[pokercat999]

3. The DOW should climb to 5700 by mid 2015, certainly no

later than September 2015.

Damn, yesterday I couldn't even spell economist and today I is one.

[bemildred]

4. Correlation is not causation.

Past performance does not guarantee future returns.

The stock markets are not orderly, predictable systems, and pretending otherwise is likely to lose you money because you will cling to your theory instead of buying low and selling high.

This is twaddle on the order of Lotto number theories, but more complicated.

[Crazy Dave]

5. People used to buy stocks the way they used to buy homes...

For the long term but no more which is why homes and the stock market are poor investment choices for the average person versus ordinary savings.

All this "buy then sell" ten minutes later because the stock price went up or down a dime is what causes most of the mess.

[bemildred]

6. Well, I know what you mean.

But trading is what markets are for, and investing and trading are different things, done with different goals in mind. With trading you are after profit, income, with savings stability becomes much more important. And I draw from that the conclusion that people who were sold stock markets, or any markets, as long-term-savings sort of things were and are gullible and lots of them will get screwed, it's happened over and over. But I am by no means suggesting that that is a good thing, just that that is the way things observerably are.

The problem with housing prices, as you point out, is that housing was turned into a market, a commodity, and hence housing prices no longer have long term stability. There is a term for it: "commodity hell", the situation where your product or service is a commodity available from many sources and you no longer have the price leverage.

I would definitely agree that "High Speed Trading" is a corrupt racket and should be outlawed.

[Warpy]

7. I disagree about the superiority of ordinary savings

because the interest rate has been barely 1% for years while the inflation rate (the real one) is well over that.

Income producing equities, on the other hand, produce interest and dividends far in excess of the laughable amount on savings accounts and CDs.

People with very small nest eggs are going to want to keep them as insulated from disaster as possible, so small amounts should probably stay in insured bank accounts and CDs. People with enough to gamble would be foolish to keep everything there, though, as inflation is eating that money up rather quickly. People with enough to gamble need a financial cushion in insured accounts, but the return will be much higher on stocks and bonds.

At least this is how it's been in the past, with equities recovering after crashes. We're in uncharted territory now. Diversification would seem to be key for people lucky enough to have investment portfolios and increasing the amount they have in insured accounts in the short term is a prudent strategy.

[Crazy Dave]

8. It's not for me but I guess it still works for some

The only thing that's worked for me the most has been putting money away and never touching it. Paid both my houses off within 15 years, still driving a car that's 11 years old and by accomplishing both objectives it allows me to put $200 a week into savings and CDs. That's even with making $200 less a week than I did five years ago.

I won't retire rich but if we all get screwed out of our social security I should be able to at least eat and keep the lights turned on....hopefully.