Keith Fitz-Gerald: You’ve no doubt heard the “crash talk” intensifying after two triple-digit down days. But after reviewing more than 100 commentaries, there are exactly two and a half I take seriously.
The one we’ll start with can not only help you now – as in today. It can also give you a permanent edge, because most people will never know how it works.
That’s a shame.
The indicator you’re about to see has predicted every major market inflection point since 1985.
And that’s why I need to show you its current “readings” while there’s something you can do about it all. We’ll look at four moves, in fact. Taking an initial stake in the shares below – or adding to your position – is just one of them…
First, here’s the indicator that can give you as much as a 30-day “heads up”…
The “Hindenburg Omen,” and Why We Take It Seriously
Named after the airship disaster of May 6, 1937, the Hindenburg Omen is about as doom-and-gloom as it gets. It’s also esoteric, which leads a lot of people who don’t understand it to pooh-pooh it.
That’s a mistake.
The Hindenburg is one of the most insightful indicators out there, for two reasons:
|1.)||It’s predicted every major market inflection point since 1985; and|
|2.)||It’s up to 90% accurate in predicting market selloffs resulting in at least a 5% correction within 30 days.|
That sounds bad, but it doesn’t have to be.
The Hindenburg is like a warning light on the dashboard in your car. In that sense, the real value is not that it’s flashing… or even that it’s lit.
What the Hindenburg is telling you is to prepare ahead of time or, for lack of a better description, to check under the hood before you have a problem.
There are very few stock market indicators that afford you the luxury of knowing what could happen before it does.
The other important thing to understand here is that 90% is not 100%. Despite the fact that the Hindenburg had triggered five readings in the last nine trading sessions as of Tuesday night, there are no guarantees the markets will crash – 10% is a lot of wiggle room.
Remember, the only sure things in life are death and taxes. Everything else is just a possibility.
Bernanke’s meddling and trillions of dollars, for example, should have us living in a modern-day version of the Weimar Republic with 1,000% inflation or more. But we’re not.
The Fed was guaranteed to fail, according to plenty of economists – yet it hasn’t. I wish they’d dismantle it, but that’s another issue.
Everybody “knew” Facebook was a slam-dunk IPO – only investors were the ones who got slammed.
That’s why it’s important to put things in perspective and view the Hindenburg for what it is: a dashboard warning light, albeit a very accurate one – especially since we’ve had back-to-back triple-digit declines this week.
So here’s what to do when it flashes…
Reading the Hindenburg Omen
1.) It has correctly predicted a market crash up to 90% of the time.
2.) It picks up on something really weird going on in the markets. The “Omen” triggers when two things happen on the same trading day: 1) at least 2.8% of all 2,800+ securities listed on the NYSE hit a 52-week HIGH and 2) at least 2.8% hit a 52-week LOW. We just don’t see that kind of extreme pricing action under “normal” market conditions. It suggests a lack of conviction that may spell trouble.
3.) It usually signifies a serious crash ahead – and soon. A confirmed Hindenburg Omen sets up at least a 77% likelihood of a move to the downside of 5% or more in the next 30 days.
4.) It’s “flashed” 11 times in the past four months. First on April 5, again in May, three times in June, and six times (so far) in August. This clustering is extremely unusual. It happened just ahead of the 2000 and 2007 crashes.
Check the Market’s “Oil”
It’s hard to view the markets in isolation; there is no silver bullet. Therefore, the first thing I do when I get a reading from the Hindenburg is to check it against other trusted indicators.(...)Click here to continue reading the original ETFDailyNews.com article: The “Hindenburg Omen,” and Why We Take It SeriouslyYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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