The so-called Hindenburg Omen, an obscure technical indicator that purportedly precedes market crashes, has some Wall Street analysts and investors very jittery. All the conditions for the omen were reportedly met last Thursday — and if it repeats in 36 days, the odds of a really big market crash jump considerably, according to believers. What are the chances the omen — named after the German zeppelin that flamed out over New Jersey in 1937 — is signaling a similar crash-and-burn for U.S. stocks? (Watch Glenn Beck warn about the omen)
The "Hindenburg Omen" is bunk: You can't blame anxious investors for trying to "make sense of an erratic stock market," says Sarah McBride at NPR. But the Hindenburg Omen, like other market "conspiracy theories," isn't actually all that accurate. Given the omen's hits and misses, relying on it "is the stock market equivalent of... claiming that Queen Elizabeth is a member of a shadowy group of lizard people."
"Markets and conspiracy theories"
The numbers don't lie: Dismiss this "scary" and "ominous" technological benchmark at your own peril, says Jim Fink in Investing Daily. The rationale behind the Hindenburg Omen makes sense — when the market has lots of stocks hitting 52-week highs and 52-week lows at the same time, that kind of confusion portends trouble — and "the last two confirmed Hindenburg Omens" have been followed by real "doozies" of crashes.
"Hindenburg Omen: Prepare for a stock market decline"
The record is scary, but mixed: Whether or not you buy into the Omen's predictive abilities "in signaling a looming market crash," says Tom Petruno in the Los Angeles Times, "may depend on your idea of what constitutes a 'crash.'" The 30 or fewer "Hindenburg sightings" include "every major stock market decline" since the "genuine crash of October 1987," but also some "blink-and-you-miss-them" dips.
"Just what the stock market didn't need: A Hindenburg sighting"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why the West should let Russia have eastern Ukraine
- The amazing resurrection of Mitt Romney
- The dangers of our passionless American life
- What would a U.S.-Russia war look like?
- The essential techniques that every home cook should know
- Why you should stop believing in evolution
- 4 strategies for organizing your money, based on your personality
- 7 grammar rules you really should pay attention to
- The week's best editorial cartoons
- Even critics of the euro didn't see this coming
Subscribe to the Week