This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How to Trade: The Hindenburg Omen Stock Market Crash

(Article updated with information on market reaching a second Hindenburg Omen on Aug. 19.)

NEW YORK ( TheStreet) -- If it feels as though you can't pull the trigger on a trade today without first consulting the Hindenburg Omen, you are not alone -- and TheStreet has help for you to avoid the stock market crash that, at this point, it may seem like the Hindenburg Omen all but guarantees.

The Hindenburg Omen is a somewhat obscure technical indicator that has suddenly become a market blog sensation. Last weekend, unlike the doomed German airship which crashed and burned (before providing a name for the bearish market signal) the Hindenburg Omen soared to become one of the most popular Google search terms. It's possible that only Federal Reserve chairman Ben Bernanke has more power to move the markets right now.

Now, according to Sentimentrader.com we had a second Hindenburg Omen trigger yesterday. Some technicians regard this as confirmation of the first reading and, therefore, a much more dire situation.


Should investors be keeping their finger on the panic button as a result of a technical indicator that many investors may have not even known about just a few days ago?

One of the main criteria for the Hindenburg Omen to be triggered is a negative reading in the McClellan Oscillator. The McClellan Oscillator is a technical indicator that relates to the market breadth, or what is known as the daily advance-decline line, tracking the difference between the number of stocks moving both higher and lower. As long as the McClellan Oscillator is positive, there is no Hindenburg Omen.

TheStreet recently caught up with Tom McClellan, editor of the McClellan Market Report, and Son of the McClellan Oscillator -- Tom's father Sherman McClellan invented the Oscillator. McClellan said investors might want to take a step back -- and take a more comprehensive view of the market outlook -- before betting all, or selling all, on the Hindenburg Omen.

TheStreet:There's been a healthy level of debate about the Hindenburg Omen, with some blogs quoting figures that it's only proven to be successful 25% of the time. Why should investors pay attention to the Hindenburg Omen at all?

McClellan: My response to the criticism that the Hindenburg Omen has only worked 25% of the time is to ask, What's the track record of a railroad crossing? Plenty of times a railroad crossing signal is triggered but there is no train. When one of these warnings is signaled, an investor needs to remember that it's simply telling you conditions exist for something to happen, but it doesn't necessary mean it will happen. It's nice to know, more or less.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,677.90 +216.58 1.32%
S&P 500 1,950.82 +23.71 1.23%
NASDAQ 4,452.7920 +69.9450 1.60%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs