(Hindenburg Omen stock market crash story updated with financial adviser's commentary about third Hindenburg Omen indicator)
NEW YORK (TheStreet) -- Following a technical abnormality known as the Hindenburg Omen (widely believed to be a precursor to a stock market crash) was reached on the New York Stock Exchange three times in August, equity analysts tell TheStreet that large consumer good stocks would fare better than most in the event of a stock market bloodbath.
It is said by some that two Hindenburg Omen occurrences within a 30-day window is an all-but guaranteed trigger of a stock market crash. The Hindenburg Omen occurs when an unusually high number of companies in the New York Stock Exchange reach 52-week highs and lows at the same time. The proportion of NYSE stock highs and lows must both exceed 2.5% of the total listed on the exchange.
Citing Sentimentrader.com, RealMoney.com contributor and CEO of Shark Asset Management Rev Shark noted in his RealMoney.com column Friday morning that we had a second Hindenburg Omen trigger last Thursday. This Wed. Shark noted that the day before, the Hindenburg Omen indicator occurred for the third time in a just a few weeks.
"I know there are many who view this dramatically named indicator as a joke, but statistically it has worked well especially when it is triggered several times within short time frame," Shark wrote. "I believe we have an oversold bounce setting up here soon but the big picture doesn't look so hot and the 'Omen' is supportive of that fact."Meanwhile, Timothy Collins, RealMoney contributor and founder of TangleTrade Management wrote in a recent column that the market needs some good news soon. "There isn't much to write in favor of the bulls at the moment. Some can point to the M&A action, but the response has been more a questioning of the prices paid or the choice of target. In other words, the deals are being questioned rather than celebrated." Collins said that ordinarily he would view the fact that the VIX volatility index hasn't hit a new high since the July 4 holiday period positively. However, the subdued VIX combined with the Hindenburg Omen occurrences has "resulted in very negative equity action." The current situation, he says, makes him nervous, given that the current VIX follows the path of previous sell-offs. That said, stocks like P&G (PG), J&J (JNJ) and Altria (MO), which are "all pretty good cash flow generators," as RealMoney contributor and Trinity Asset Management's Brian Gilmartin notes, would definitely be "a flight-to-safety trade if the market declines 10%."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV