Hindenburg Omen

The Hindenburg Omen is a technical indicator that can give you a heads up when a bulls market is likely to peak and start heading lower. This indicator was named after the famous Hindenburg disaster of May 1937 a German airship had a terrible crash.

There are many different indicators it looks at in order to predict the top, but the main indicator is the 52 week high and 52 week lows in the NYSE.

If the 52 week highs and 52 week lows both account for over 2.2% of the total stocks in the market it is an indicator that there is a lot of indecision in the market and it could turn around at any time.

The 5 exact signals that you need to see for it to be considered a Hindenburg omen are.

1. The daily number of NYSE 52 week highs and 52 week lows are both over 2.2%

2. The Smaller of these numbers is over 75

3. The NYSE 10 week moving average is going up.

4. The number of 52 week highs is not over twice as much as the number of 52 week lows.

That is the formula, but how reliable is it? It has been able to predict every stock market crash successfully since 1985, which should say something about how accurate it can be. But that does not mean it is without flaws. Over that same time period it has generated many false signals of doom.

It should be taken as nothing more than a warning of what might come. If all 5 signs are pointing to a crash then you might want to tighten up your stops just in case, but exiting a position that is still going up because of this signal is not always a wise thing to do. After all if it is a false signal or if it does take a while for it to kick in you could miss a substantial move by exiting early.

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