Hindenburg Omen
The “Hindenburg Omen” is named after the Hindenburg passenger airship that burst into flames in 1937, killing 36 people. Jim Miekka, a blind mathematician and writer for the Sudbury Bull & Bear Report, calculated that when new highs and new lows on the New York Stock Exchange occurred, a stock market crash could be predicted. Kennedy Gammage, a writer for the Richland Report, wrote this in 2005 (see below): “Because it signals the possibility of a stock market crash, I suggested that Jim name it after that famous ill-fated aircraft associated with the word ‘crash.’”
The name “Hindenburg Omen” has been cited in print since at least 1997, but has been cited most frequently since 2005.
Wikipedia: Hindenburg disaster
The Hindenburg disaster took place on Thursday, May 6, 1937, as the German passenger airship LZ 129 Hindenburg caught fire and was destroyed as it was attempting to dock with its mooring mast at the Lakehurst Naval Air Station, which is located adjacent to the borough of Lakehurst, New Jersey. Of the 97 people on board, 35 people died in addition to one fatality on the ground. The disaster was the subject of spectacular newsreel coverage, photographs, and Herbert Morrison’s recorded radio eyewitness report from the landing field, which was broadcast the next day. The actual cause of the fire remains unknown, although a variety of theories have been put forward for both the cause of ignition and the initial fuel for the ensuing fire. The accident served to shatter public confidence in the giant, passenger-carrying rigid airship, and marked the end of the airship era.
Wikipedia: Hindenburg Omen
The Hindenburg Omen is a technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.
History
The Omen is said to have originated with Jim Miekka. Miekka, who was probably the foremost expert on the Omen (and associated with the Sudbury Report), suggested to his friend Kennedy Gammage that the pattern be dubbed the “Hindenburg Omen” after that ill-fated dirigible.
Mechanics
The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market—specifically the NYSE.
The main goal of the indicator is to determine if a higher overall probability exists such that a stock market crash has a higher likelihood than normal.
The Hindenburg Omen can also assess to a limited extent if a probability of a severe decline is on average higher than normal.
The general rationale behind the indicator is that “under normal conditions” either
1. A substantial number of stocks set new annual highs
2. A substantial number of stocks set new annual lows
3. Conditions 1 & 2 cannot both take place at the same time, it is either one or the other—but not both
However, this indicator mainly tracks new lows and downside risk. This is a part of its strength and part of its weakness.
A healthy market requires some degree of internal uniformity, whether the direction of that uniformity is up or down.
Criteria
The traditional definition of a Hindenburg Omen requires that:
1. 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 (currently, greater than or equal to 69, which is above 2.2% of 3126).
2. The NYSE 10 Week moving average is rising.
3. The McClellan Oscillator is negative on that same day.
4. 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.
These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen.
(...)
Recent occurrences
August 12, 2010: A Hindenburg Omen occurred, the first since the market lows of 2009. One nearly occurred on August 11, failing only in that 67 stocks hit new lows, rather than the required 69.
June 22, 2007: There were 3,422 NYSE issues traded, with 88 New Highs and 73 New Lows, the lesser number equal to 2.13 percent of total issues traded, almost 2.20 percent. The McClellan Oscillator was negative -116.59.
June 21, 2007: There were 3,434 NYSE issues traded, with 106 New Highs and 75 New Lows, the lesser number equal to 2.18 percent of total issues traded, almost 2.20 percent. The McClellan Oscillator was negative -36.65.
June 13, 2007: There were 3,428 NYSE issues traded, with 96 New Highs and 95 New Lows, the common number equal to 2.77 percent of total issues traded, above the minimum requirement of 2.20 percent. The McClellan Oscillator was negative -116.92.
Investopedia
Investopedia explains Hindenburg Omen
Traders use an abnormally high number of 52-week highs/lows because it suggests that market participants are starting to become unsure of the market’s future direction and therefore could be due for a major correction. Proponents of this indicator argue that it has been very accurate in predicting sharp sell-offs in the past and that there are few indicators that can predict a market crash as accurately.
McClellan Financial Publications
Sherman McClellan’s Presentation to the Market Technicians Association
(...)
Kennedy Gammage was a frequent guest on Charting The Market. He writes the Richland Report. That name comes from the name and ashes of the family plantation in the south. Kennedy was influenced by a money manager named George Chestnut and his assistant Warren Green. They didn’t care whether a company made bombs or sweaters as long as the chart went up. Kennedy still does his money management, and still writes the Richland Report. He did work for Mansfield Mills until they were bought out by a bank. The new owners couldn’t deal with someone actually using charts to manage other peoples’ money and they parted ways. His Richland Report has featured the McClellan Oscillator since its invention. I wrote to him in August 1987 and said that a very important Summation Index top was put in, and that a very weak market was coming. He was kind enough to print that letter.
(...)
One other name is Jim Miekka that you may not know. He is a blind mathematician. He writes a little known market analysis letter called the Sudbury Bull & Bear Report. He did the math to generate the McClellan Summation Index using only the 10% and 5% Trend values. He also identified a condition that Kennedy Gammage named the “Hindenberg Omen” which predicts a high probability for a crash within the next 30 days only. That omen showed up ahead of the crash in 1987. It is not in the MTA book of knowledge, but I will see that it gets there.
24 December 1997, San Diego (CA) Union-Tribune, “Market is waiting for Santa, too” by Don Bauder, pg. C1:
In his Nov 28 issue, he said he had received a Hindenburg Omen—a technical signal that warns of a big crash coming in the not too distant future. “You can color us very, very nervous,” [Kennedy Gammage] said in late November.
This technical signal was invented by Jim Miekka of the Sudbury Bull & Bear Report of St. Petersburg, Fla. The mathematical warning signals flash “when certain patterns occur in new highs and new lows on the New York Stock Exchange,” Miekka says.
Safehaven.com
The Hindenburg Omen - A Potential Stock Market Crash Signal
By: Kennedy Gammage | Sun, Oct 2, 2005
No indicator can predict with 100 percent certainty when the stock market is going to crash, but here is one indicator that identifies the possibility.
The Hindenburg Omen was adopted by Jim Miekka, editor and publisher of The Sudbury Bull and Bear Report (6735 14th Street, St. Petersburg, FL, (813) 866 - 8682), derived from a New High - New Low indicator developed by Gerald Appel many years ago. It worked for a time, but Jim then made certain changes in its makeup and calculation which gave it greater reliability. Because it signals the possibility of a stock market crash, I suggested that Jim name it after that famous ill-fated aircraft associated with the word “crash.”
MarketWatch
Oct. 5, 2005, 12:01 a.m. EDT
Watch out for the Hindenburg Omen
By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch)—According to a little-known technical indicator known as the Hindenburg Omen, the risk of a stock market crash right now is high.
Should we pay any attention to this indicator?
“Yes” is the answer from quite a few of the investment newsletters I monitor. Indeed, in recent days so many advisers have referred to the warnings that the indicator is emitting that investing blogs are all abuzz.
And, naturally, more than a few of you emailed me to ask that I devote a column to it.
Let me start by reviewing the Hindenburg Omen. The core idea behind it is that it’s bearish whenever there are a large number of both new 52-weeks highs and new 52-week lows on the New York Stock Exchange.
From what I can tell, it was created in the 1970s by a fellow named Jim Miekka, who was editor of a newsletter called the Sudbury Report. Credit for christening this indicator the “Hindenburg Omen” goes to Kennedy Gammage, who used to edit a newsletter called the Richland Report.
Google Books
The Index Trading Course Workbook:
Step-by-step exercises and tests to help you master the index trading course
By George Fontanills and Tom Gentile
Hoboken, NJ: John Wiley & Sons
2006
Pg. 136:
Hindenburg Omen: Created by Jim Miekka and popularized by Kennedy Gammage, the Hindenburg Omen is a somewhat complex indicator that forewarns of market crashes. It requires the following events to trigger a signal: (1) Both 52-week highs and 52-week lows are greater than 2.2 percent of all issues on the New York Stock Exchange; (2) the 10-week moving average of the NYSE Composite Index is trending higher; and (3) the McClellan Oscillator (a technical trading indicator) is an oversold territory. All of these factors suggest that although the market is trending higher, there is a significant amount of uncertainty and confusion—a situation that is ripe for a market crash.
The Market Oracle
Recent Hindenburg Stock Market Crash Omen
Jul 04, 2008 - 02:26 PM
By: Robert_McHugh_PhD
So what is a Hindenburg Omen? It is the alignment of several technical factors that measure the underlying condition of the stock market — specifically the NYSE — such that the probability that a stock market crash occurs is higher than normal , and the probability of a severe decline is quite high. This Omen has appeared before all of the stock market crashes, or panic events, of the past 22 years. All of them. No panic sell-off occurred over the past 22 years without the presence of a Hindenburg Omen. Another way of looking at it is, without a confirmed Hindenburg Omen, we are pretty safe . But we have one as of June 16th, 2008.
Google Books
Dow theory unplugged:
Charles Dow’s original editorials & their relevance today
By Laura Sether
Cedar Falls, IA: W & A Publishing
2009
Pg. 163:
One tool that has used breadth measures to successfully call market turns is the Hindenburg Omen, usually credited to Jim Miekka and Kennedy Gammage. The indicator uses new highs and lows and the McClellan Oscillator (a breadth indicator), among other measures, to successfully spot points where supply and demand are out of balance and the market vulnerable to a change in trend. It has called tops about 77 percent of the time, according to one study—no small feat—and appears to be equally useful at calling bottoms.
Wall Street Journal
AUGUST 13, 2010, 6:50 P.M. ET
Wall Street Wonders If ‘Hindenburg Omen’ Just A Lot Of Hot Air
NEW YORK (Dow Jones)—Forget about Friday the 13th. Many on Wall Street took to whispering about an even scarier phenomenon: the “Hindenburg Omen.”
The Omen, named after the famous German airship that crashed in Lakehurst, N.J., in 1937, is a technical indicator that is said to foreshadow not just a bear market but a stock-market crash. Its creator, a blind mathematician named James Miekka, said his indicator is now predicting a market meltdown in September.
Investment Advisor
Hindenburg Omen Reportedly Returns. Will Doom Follow?
Convergence of five technical indicators is said to predict a market crash
Marlene Y. Satter
8/15/2010
Word on the Street says that the Hindenburg Omen has reappeared. The phenomenon, a grouping of five linked technical indicators that have historically made their joint appearance preceding previous market crashes, was talked about on Friday the 13th in blogs and articles all over the financial sphere.
Named after the explosion of the hydrogen-fueled dirigible at Lakehurst, New Jersey, in 1937, the five indicators were variously reported to have recurred Tuesday or Thursday, depending on sources. Even Britain’s Daily Telegraph warns of potential catastrophe for the FTSE, despite the fact that the Omen is supposed to be an exclusively NYSE phenomenon.
Mathematician Jim Miekka is credited with devising the system, which, according to one source, is used to predict sharp corrections and helps traders to profit or evade losses.