 | Whatever Happened to the Ominous Hindenburg Omen? |
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Forty one days ago, a technical indicator called the Hindenburg Omen was triggered. Glen Beck on Fox News and many influencial finanical blogs highlighted it as a sign of an imminent stock market crash. At the time, we thought it was a farce—a made up tool to generate fear—but after some digging, we found out that there really is a thing called the Hindeburg Omen. Just a couple days after the indicator was triggered, we blogged about how it's just another case of Economic Hypochondria. See our original post here.
For the Hindeburg Omen to be triggered, at least 2.2% of the market's stocks must hit a new annual high at the same time at least 2.2% hit a new annual low, while the MaClellan Oscillator falls and the markets 10-week moving average rises. On top of that, the number of new highs cannot be more than twice the new lows. It is said to predict a 5% downward move in stocks within the next forty days.
Yesterday marked exactly forty days since the Hindeburg Omen was triggered on August 12th. Since then, the Dow is up 4.3%, the S&P 500 is up 5.2%, and the Nasdaq is up 7.3%. Google Trends data shows that search volume for "Hindenburg Omen" reached 114 times higher than the average volume of 2004-2010 in mid-August. Today, searches for the indicator are back to the historical average. The Hindenburg Omen is just another ominous indicator that didn't come true and has already been forgotten.
Once again, the fear mongers have been wrong. The reason we are dredging up the past is because people forget what they were once afraid of. Fears about the Hindenburg Omen last month were overblown, and it serves as another example of the Economic Hypochondria many people suffer from. People will believe anything about the economy and the stock market as long as it's negative.
With productivity and profits strong, the Federal Reserve highly accomodative, and the midterm elections looming, the market remains undervalued and a double dip remains highly unlikely.
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