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What is the Hindenburg omen and is there any merit to it?

What is the Hindenburg omen and is there any merit to it?

The Hindenburg Omen is technical indicator meant to predict bear markets, sell-offs, and declines. It is named after the famous tragedy of the Hindenburg Zeppelin in Germany on May 6th, 1937.

The “Omen” identifies several very complex technical patterns in the behavior of the NYSE, such as the number of new highs, new lows, and some other indicators. It claims to predict market crashes within a very short period of time (about 40 days).

The statistics of the Hindenburg Omen might seem impressive: every New York Stock Exchange crash (except two) since 1985 have been predicted by this omen.

However, it has also given plenty of false positives that never manifested in the market, to the point where most knowledgeable traders don’t treat it as fact. It does indicate that precarious conditions might be present.

What is the Black Swan Theory?
Is There Such a Thing as the “Pre-Holiday Effect?”

Keywords: portfolio theories, technical analysis, superstition, technical indicators, New York Stock Exchange (NYSE), market timing, new lows vs new highs,
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