Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
5 Ways to Beat the Fed (and Crush Inflation)

Email this Article

Send with mail | ahoo instead.
Required Needs to be a valid email
Required Needs to be a valid email
Stock Market Crash 2013: What the "Hindenburg Omen" Tells Us
http://mney.co/1d0jqzb
Required Please enter the correct value.
Twitter

Stock Market Crash 2013: What the "Hindenburg Omen" Tells Us

By Don Miller, Contributing Writer, Money Morning • August 2, 2012

View Comments

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

Should you be worried about a stock market crash in 2013... or even sooner?

Certainly, there's plenty of unsettling news to worry about.

You know what I'm talking about...the persistent Eurozone debt crisis, Taxmageddon, the fiscal cliff, high unemployment. The list goes on and on.

But now, there's one more reason to fasten your seat belt.

On the heels of a sharp stock market decline on July 24, a highly accurate technical indicator called the "Hindenburg Omen" started ringing warning bells.

Ever since it was discovered, this ominous-sounding signal has proven remarkably accurate in gauging the stock market's relative strength or weakness.

In fact, the Hindenburg Omen has nailed every New York Stock Exchange (NYSE) crash since 1985.

Here's what you should know.

The Hindenburg Omen Basics

The famous German airship known as the Hindenburg became one of history's most prominent images of disaster when it burst into flames while attempting to land at Lakehurst, NJ, in 1937.

The doomed airship later became the moniker for a technical tool invented to predict a potential stock market crash.

The underlying concepts of the Hindenburg Omen revolve around market breadth theories created by Norman Fosback, an investment strategist who co-founded The Institute for Econometric Research in 1971.

The theory suggests that when markets are hitting new highs, the number of companies posting 52-week highs should be greater than the number experiencing 52-week lows. Conversely, when the market is creating new lows, the number of companies trading at their 52-week lows should outnumber the companies recording new highs.

There are three technical indicators that, when met, signal a "warning":

  • First, the number of NYSE new highs and lows must be higher than 2.8% of the advances plus declines.
  • Second, the number of new highs cannot be more than twice the number of new lows.
  • And third, the NYSE composite must be above its 50-day moving average.

All these conditions were met on July 24, triggering a Hindenburg Omen warning.

When that happens, a 30-day cautionary period begins.

A second reading within that time period suggests a 77% probability of at least a 5% decline in the following 40 days.

Over and over again, the Hindenburg has proven to be about as good as it gets when it comes to being able to identify crashes before they happen.

Between 1985 and 2006, the omen rang the alarm before every stock market crash or panic event, Robert McHugh, CEO of Main Line Investors, told USA Today.

Even better, this signal doesn't come around all that often. It only created a signal on 160 separate days, or 3.2% of the approximate 5,000 days that he studied.

The signal flashed seven times in 2008, as the S&P 500 posted its biggest annual drop since the Great Depression.

The last time the Hindenburg alarm went off was in August 2011. The Dow Jones Industrial Average then proceeded to plunge 16.2% from its July highs.

Analysts Issue Warnings

The Hindenburg isn't the only reason to believe the market could be in for a reversal.

Robert Prechter, author of Conquer the Crash, warns that today's economy looks eerily like the Great Depression and deflation will cause financial chaos.

Prechter predicts that the major U.S. stock indexes will plunge below their bear market lows hit in March 2009 during the last financial crisis.

"For the third time in a dozen years, the stock market is in a very bearish position," Prechter told USA Today.

If he's right, stocks would lose more than half their value.

Prepare Now for Stock Market Crash 2013

We don't yet have a secondary confirmation of the Hindenburg Omen, so there's still time to get ready for a market tumble.

Shorting stocks or purchasing "put" options on an index is the most obvious strategy.
You can also purchase specialized inverse funds like the ProShares Short Dow30 ETF (NYSEArca: DOG), that actually rises when the big blue chips fall.

Getting ahead of the crowd also allows you to tighten up your trailing stops as a means of protecting hard-earned profits.

Finally, it's a great time to put together a "shopping list" of stocks you want to buy, as they become cheap relative to their intrinsic value.

Money Morning Chief Investment Strategist Keith Fitz-Gerald has strongly encouraged investors to look at "glocal" companies as a way to weather even the worst stock market swoons.

These are large, U.S.-based multinational corporations like McDonald's Corp. (NYSE: MCD) and Altria Group Inc. (NYSE: MO) that rake in profits from global operations but also have a local presence.

Again, we're not saying you should be market timers. Study after study has shown the dangers of that approach. But the Hindenburg Omen may be suggesting caution is in order, along with a little preparation.

By being opportunistic, you can take steps to preserve your wealth against a stock market crash and capitalize on opportunity when it knocks.

Related Articles and News:

  • Money Morning:
    Fiscal Cliff 2013: Politicians Playing Chicken with Your Money on the Line
  • Money Morning:
    Are You Ready for "Taxmageddon"?
  • Money Morning:
    Five "Extra" Moves to Make Right Now to Protect Your Financial Future
  • Money Morning:
    Four Debt-Free Companies to Own if the Markets Tank-and Even if They Don't
  • Money Morning:
    How to Short Stocks Along With Four Good Candidates
  • Investopedia:
    Hindenburg Omen
  • Smart Investing:
    Hindenburg Omen Stock Market Crash Signal July 24 2012
  • USA Today:
    3 doomsaying experts who foresee economic devastation ahead

Join the conversation. Click here to jump to comments…

Login
guest
guest
4 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
airan pev
airan pev
10 years ago

love the Comment …2013 watch the space

0
Reply
Arch Crawford
Arch Crawford
10 years ago

The BRADLEY Model made up entirely of astronomic cycles had its yearly high on March 16, 2012. In our CP newsletter we entered 100% SHORT positions (without using margin) on market open March 14 at DJIA 13,177.15 and S&P500 1395.95. and doubled down to 200% SHORT (using full margin) on July 16 close at DJIA 12,727.21 and S&P500 1348.51. STOP-LOSS Orders are in for a close above DJIA 13,638.35 and S&P500 1444.81. A minor BRADLEY High date took place on July 28.

We entered the period of the Mars-Uranus potential Crash section on July 18 – lasts until late FEB.

Arch Crawford
Crawford Perspectives

0
Reply
seeno
seeno
10 years ago

thanks for the entertainment

0
Reply
ragesh
ragesh
10 years ago

thanks for providing the right onformation

0
Reply
LIVE
Visit Money Morning Live


Latest News

January 19, 2023 • By Money Morning Stock Research Team

These Stocks Could Go To $0

January 9, 2023 • By Money Morning Stock Research Team

The Government Is Pouring $391 Billion Into These Stocks - Buy Now

December 27, 2022 • By Money Morning Staff Reports

6 IPOs in 2023 You Can’t Afford to Miss
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover This Is VWAP Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Warlock's World Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Vega Burst Trader Flashpoint Trader Darknet Hyper Momentum Trader Alpha Accelerators Weekly Profit Cycles

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz