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Hindenburg Omen 
 Definition 		Technical_Analysis_Of_Stock_Trends





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Definition:  The Hindenburg Omen is a technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.

In order for the Hindenburg Omen to be reached, all of the following must occur:
  1. The daily number of NYSE new 52-week highs and the daily number of new 52-week lows are both greater than or equal to 2.8% of NYSE issues trading that day.
  2. The NYSE’s 10-day moving average is rising, or the index has moved higher during the past 50 trading days.
  3. The McClellan Oscillator is negative on the same day. This is the the difference between the advancing and declining equities on the NYSE.
  4. New 52-week highs cannot be more than twice the new 52- week lows (though new 52-week lows may be more than double new highs).
The traditional definition requires each condition to occur on the same day. Once the signal has occurred, it is valid for 30 days, and any additional signals given during the 30-day period should be ignored. During the 30 days, the signal is activated whenever the McClellan Oscillator is negative, but deactivated whenever it is positive
 
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The Hindenburg Omen has predicted every stock crash since 1987, BUT it also has a ton of false positives.  Only about 25% of the time does it actually foretell a crash.

From historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty days. The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. Though the Omen does not have a 100% success rate, every NYSE crash  since 1985 has been preceded by a Hindenburg Omen. Of the previous 25 confirmed signals only two (8%) have failed to predict at least mild (2.0% to 4.9%) declines.
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