The Hindenburg Omen was a proposed

technical analysis In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the sam ...

pattern, named after the

Hindenburg disaster The ''Hindenburg'' disaster was an airship accident that occurred on May 6, 1937, in Manchester Township, New Jersey, United States. The German passenger airship LZ 129 ''Hindenburg'' caught fire and was destroyed during its attemp ...

of May 6, 1937. It was created b
Jim Miekka
who believed that it predicted

stock market crash A stock market crash is a sudden dramatic decline of stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especia ...

es.

History

The theory is largely based on Norman G. Fosback's High Low Logic Index (HLLI). The value of the HLLI is the lesser of the NYSE new highs or new lows divided by the number of NYSE issues traded, smoothed by an appropriate

exponential moving average In statistics, a moving average (rolling average or running average) is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. It is also called a moving mean (MM) or rolling mean and is ...

. The theory itself was promoted by Jim Miekka,.Morris, Gregory (2005). ''The Complete Guide to Market Breadth Indicators: How to Analyze and Evaluate Market Direction and Strength'', p. 219. McGraw-Hill. .

Mechanics

The pattern functions on a combination of

technical Technical may refer to: * Technical (vehicle), an improvised fighting vehicle * Technical analysis, a discipline for forecasting the future direction of prices through the study of past market data * Technical drawing, showing how something is co ...

factors that attempt to measure the health of the

NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District, Manhattan, Financial District of Lower Manhattan in New York City. It is by far the List of stock exchanges, world's largest s ...

, and by extension, the stock market as a whole. The goal of the indicator is to signal increased probability of a

. The rationale is that under "normal conditions" a substantial number of stocks may set ''either'' new annual highs ''or'' new annual lows, but not both at the same time. As a healthy market possesses a degree of uniformity, whether up or down, the simultaneous presence of many new highs and lows may signal trouble. Theoretically, it could be applied to any stock exchange. Criteria include: # The daily number of

new 52-week highs and the daily number of new 52-week lows are ''both'' greater than a threshold (proposed at 2.8%) # The NYSE index is greater in value than it was 50 trading days ago - 50-day Rate of Change (ROC) should be positive. Originally, this was expressed as a rising 10-week

moving average In statistics, a moving average (rolling average or running average) is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. It is also called a moving mean (MM) or rolling mean and is ...

, but the new rule is more relevant to the daily data used to look at new highs and lows. As a rule, the shorter the time-frame in which the conditions listed above occur, and the greater the number of conditions observed in that time frame, the stronger the effect. If several—but not all—of the conditions are repeatedly observed within a few weeks, that is a stronger indicator than all of the conditions observed just once during a 30-day period.Investopedia
Hindenburg Omen entry

References

{{Reflist, 30em Technical analysis

History

Mechanics

See also

References