There has been a lot of commotion lately about what is termed the “Hindenburg Omen”. I’ve seen main stream news shows, talk shows and a ton of blogs writing about it. In fact if you type in “Hindenburg” on Yahoo, the first ‘auto-complete’ suggestion is “Hindenburg Omen” and not the much more infamous “Hindenburg Disaster” for which it is named after. Heck, even my own mother called me earlier today to ask me what it all meant! So the phrase has definitely gained the attention of main-stream America.
I’m going to avoid getting into the theory itself, outside of a broad overview to briefly explain what it means, in case you don’ t know yet. Beyond that, I plan on keeping it simply to my views and what we can expect from it going forward.
Simply put, the Hindenburg Omen is basically when the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows are both greater than 2.2 percent of total NYSE issues traded that day – which really means that the market is confused, that the bulls and bears are in a dogfight for control of the market. For more on this check out the wiki page that does a good job describing it in further detail.
As for what I think should be taken from this, is not much quite frankly. For one, just because this phenomenon occurs doesn’t spell impending doom, in fact, many times the market moves even higher. Now I realize that there have been some pretty hefty sell-offs when this pattern occurs, but to say that it results in impending doom is a bit conspiratory. It is like saying “Oh my gosh, Billy-Bob just sneezed…he must have a cold…he’s going to infect us all…we are all doomed!” Doesn’t make much sense does it? Now that doesn’t mean we won’t see a double-dip back to the March ’09 lows or worse – I tend to believe that we eventually will, but I just don’t think that by having the “Hindenburg Omen” playing itself out before hand is necessary nor indicative of any future decline in the market.
So stay level-headed, don’t let this highly publicized indicator worry you, or propell you to action in the market – instead let your decisions be based on pure rational thought unencumbered by the masses hyping an event that really doesn’t mean much in the grand scheme of things. A month (or less) you’ll likely forget all about this theory or that it ever happened.