Hindenburg Omen
Categories: Financial Theory
The heavy Hindenburg Omen is as bad as it sounds. The Hindenburg Omen is a way to measure the likelihood of a market crash based on the number of 52-week highs and 52-week lows on a 50-day upward trend.
Named after the famous (for crashing) Hindenburg airship, the Hindenburg Omen is considered to be confirmed if, after the two factors above have been reached, the McClellan Oscillator (MCO) is negative during the month afterward. If the MCO is positive, it’s a false alarm, and the market isn’t going to crash.
It’s kind of like the groundhog on groundhog day.
Traders might take the confirmation of the Hindenburg Omen as a sign to exit the market before things get worse.