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Um. . . something called a “Hindenburg Omen” has the stock market concerned. What does it means?

It sounds like a sequel to “The Girl with the Dragon Tattoo,” but a “Hindenburg Omen” isn’t any fun. If you want to call attention to potential bad news, it’s hard to go wrong with the name “Hindenburg.”

Paul von Hindenburg was a celebrated World War I general and a less celebrated President of Germany. The more infamous Hindenburg, however, is the dirigible named for the general and its corresponding disaster. On the cover of Led Zeppelin’s 1st album is an image of a zeppelin crashing. That’s the LZ 129 Hindenburg, a gas-filled airship that travelled around the world. (A zeppelin is like a blimp but with a rigid, often metal hull. Add an “A” to “Led” and you can figure out from where Jimmy Page and company derived their name.)

On May 6, 1937, the Hindenburg exploded in New Jersey, killing 36 people. The tragedy dashed the nascent field of zeppelin travel and had a massive impact due to vivid photographic and radio coverage. The symbolic power of the event lives on in a variety of expressions, including of course the Hindenburg Omen.

An omen is “anything perceived or happening that is believed to portend a good or evil event or circumstance in the future.” Many people already know this due to a creepy series of films.

As you’ve probably surmised, the aforementioned Omen alludes to a potential crash, of the financial kind. In simple terms, the Hindenburg Omen is a technical measure of the stock market that may indicate the potential for a market crash or decline. The financial analyst Jim Miekka receives credit for the name, though the measure precedes him.

In simple terms, the Omen occurs if a particularly large number of stocks on the New York Stock Exchange hit new 52 week highs and lows on any given day. The number of new 52-week lows must be greater than the number of new 52-week highs. The measure kicked in on Thursday.

This combination reflects an ominous level of instability and divergent movement in the market. It is not, however, a guarantee of any particular outcome in the economy. A single instance of this is an unconfirmed Hindenburg Omen. Check back in 36 days — if the condition has occurred at least once more in this interval, it’s called a confirmed Hindenburg Omen.

The idiom “a grain of salt” feels apropos right about now, but anything with such a spooky name is probably worth knowing about.

The stock market has another bizarre term: “quadruple witching days.” Find out what that means, right here.

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24 Comments

  1. GrayKat -  August 26, 2010 - 11:28 am

    Hate to tell you guys, but the conditions of the omen were met earlier this week. The last time the “omen” hit was in April 2008. (Think there is any connection? How much are you willing to bet?)

    Reply
  2. Raela -  August 19, 2010 - 10:30 am

    Hey, the omen thing has worked before.
    It’s funny how people will beleive the Mayans predicted the end of the world in 2012, but the politicians can’t understand a simple trend (downward, really) in American economics. They say we’re doing better.

    Uh…………………………

    Reply
  3. Dennis -  August 19, 2010 - 5:18 am

    Sounds like voodoo economics to me. lol

    Reply
  4. Parch -  August 16, 2010 - 12:46 pm

    @Matt J.
    All investing is speculating.
    All investors are speculators.
    Your argument is invalid.

    Reply
  5. Jonathan restraurant -  August 15, 2010 - 4:12 am

    nice article and speculators enjoy this although I do not understand it.

    Reply
  6. Andrea -  August 14, 2010 - 7:13 pm

    The number of companies’ stock price which hit their low must be more than the number of companies’ stock price which hit their high. x=# of cos. at low, y=# of cos. at high. x>y

    Reply
  7. Donald -  August 14, 2010 - 6:51 pm

    The Hindenburg omen was developed to predict the potential for a financial market crash. It is created by monitoring the number of securities that form new 52-week highs relative to the number of securities that form new 52-week lows – the number of securities must be abnormally large. This criteria is deemed to be met when both numbers are greater than 2.2% of the total number of issues that trade on the NYSE (for that specific day).

    Im assuming this is what the Author or Editor meant.

    Reply
  8. Matt J. -  August 14, 2010 - 2:11 pm

    Jeremy is right, there is an egregious error in paragraph 6. Unfortunately, it is not the only error in this generally supersitious, unscientific article.

    The belief in the validity of the “Hindenburg Omen” is nothing more than a modern form of superstition, another form of ‘chartism’, a supersitious belief that has cursed the stock market for some years now.

    But even if we do correct the error in paragraph 6, the article still misses the point of the “Hindenburg Omen”: there are other necessary criteria, such as a rising 10 week moving average for NYSE and a negative “McClellan Oscillator”.

    What the market and economy really need now is for ‘investors’ to start living up to the name of ‘investor’, and stop acting like speculators, worse yet, sheep-like speculators.

    Reply
  9. Richard -  August 14, 2010 - 12:52 pm

    Hey Dan & Jeremy….

    You guys can’t even read correctly. Therefore, maybe you shouldn’t be commenting. The real quote is “In simple terms, the Omen occurs if a particularly large number of stocks on the New York Stock Exchange hit new 52 week highs and lows on any given day. The number of new 52-week lows must be greater than the number of new 52-week highs.”

    Reply
  10. Adjoran -  August 14, 2010 - 11:57 am

    The number of new lows must be greater than the number of new highs. The signal’s strength also depends on the ratio; so if lows outstrip highs by 4-1, that’s a stronger sign than if it is merely 3-2, for example.

    Reply
  11. Tommy -  August 14, 2010 - 9:43 am

    This person is trying to give new definition for a word that is already defined. “Omen” has nothing to do with the stock markets rise or fall, it’s not a mythical or spiritual being with a soul. If you want a word to define the stock markets possible fall, you need to be creative, don’t grab a word that already has a meaning.

    Reply
  12. mike -  August 14, 2010 - 9:40 am

    Huh? I just re read paragraph 6 and it reads just fine to me The number of new 52-week lows must be greater than the number of new 52-week highs. Either it has been fixed or you guys need to put your reading glasses on.

    Reply
  13. Lauren -  August 14, 2010 - 9:32 am

    This was a good read. Looks like the low compared to low correction has been made already so now the (above) comments look kind of funny.

    Reply
  14. hawkspurr -  August 14, 2010 - 8:59 am

    The article states:
    “In simple terms, the Omen occurs if a particularly large number of stocks on the New York Stock Exchange hit new 52 week highs and lows on any given day. The number of new 52-week lows must be greater than the number of new 52-week highs. The measure kicked in on Thursday.”

    I don’t think stocks can be explained in simple terms… Let’s look at it hypothetically…

    Let’s pretend that the “large number of stocks” is equal to 100 stocks.

    The value of each of the 100 stocks is recorded once a week for 52 weeks. The values are recorded on a graph and then lines are drawn to show when the values have gone up (high) or when they have gone down (low).

    These 100 stocks change every week. Last Thursday what happened was a greater majority of the stocks went low than went high.

    It doesn’t necessarily mean that 99 of the stocks tanked and one stayed afloat.

    It could be that 51 of the stocks came in low and 49 of them went high.

    This could mean that 50 of the stocks stayed in the middle and 30 went low while 20 remained high. Hence, “the number of new lows would be greater than the number of new highs.”

    If this is so, then you could even guesstimate that if 97 of the stocks stayed the same (in the middle), and 2 went low while 1 went high that alarmists could cry out that the Hindenburg Omen was upon us.

    Reply
  15. years ahead -  August 14, 2010 - 8:41 am

    I do not get myself caught up with the stock market excitement too much:I am not anti-capitalism though.

    Reply
  16. PatrickMH -  August 14, 2010 - 6:59 am

    Capitalism is dead. The world needs to move towards a more caring place: bereft of violence and wars. Lots of “truth, honesty, and compassion” would help.

    Reply
  17. Jeremy -  August 14, 2010 - 6:06 am

    I believe there is an error here. In paragraph six, you write:

    “The number of new 52-week lows must be greater than the number of new 52-week lows.”

    So X must be greater than X? I realize one of them must be the high, I just don’t know which one. Since I’m interested in the financial markets right now (as everyone should be) I would like to know which instance of “low” should be a “high.”

    Reply
  18. Sanah -  August 14, 2010 - 5:54 am

    Dictionary new word.

    Reply
  19. Dan -  August 14, 2010 - 1:39 am

    “The number of new 52-week lows must be greater than the number of new 52-week lows.”

    Huh? This site badly needs an editor!

    Reply
  20. Arazi -  August 13, 2010 - 11:29 pm

    This was very informative, yet quite depressing at the same time knowing that the uptick in the economy might plummet again.

    Reply
  21. purring -  August 13, 2010 - 6:48 pm

    What the source of the oracles incites me the most! Whether the market carashes or not is beyond my personal interest, but omen always should be positive and bring a good tiding. By the way, I have a wish to live in the South, say Lousianna. I have not recieved any oracle yet and hope that comes to fruition.

    Reply
  22. JoyCorcoran -  August 13, 2010 - 5:05 pm

    This is a nice one to follow the “triskaidekaphobia” post — how much of our economy rises and falls on omens and superstitions. Is there a word for fear of stock markets?

    Reply

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