How to Trade: The Hindenburg Omen Stock Market Crash
The problem is not liquidity-related right now, but emotional. It's been three years since we had a Hindenburg Omen and we haven't had the right conditions until now. Also, you didn't need a Hindenburg Omen in 2008 to tell you that there was a problem. When there is an uptrend in the market, that's when you need it. So I look at it and acknowledge it, but as long as the McClellan Oscillator turns back positive I say it's not raining outside.
Liquidity signals are saying something other than prices. When you see that the S&P 500 is still below its 2007 high, that's a negative, but the advance decline line has already exceeded its 2007 high, so there is disagreement there. You can't have a strong advance-decline line in absence of strong liquidity. So who do you listen to? I can only say that it's all something to listen to.
TheStreet: Could it just be a slow moment in the news cycle?
McClellan: One data set that is different today than in the past is the blogosphere itself. The blogosphere is larger than it ever was, so you have to adjust for the growth of the blogosphere when thinking about how pervasive the Hindenburg Omen has become in the past few days. It is a slow news period, too, with the August recess in Washington D.C., and no terrorist bombings lately, among a million other things. We have to talk about something, but I think that type of media cynicism misses the mark in this case.Despite the market showing strong liquidity, remember that economic pessimism is rampant out there, not investment pessimism, but economic sentiment that is horrible. People are about as pessimistic as they were in 2008 for whatever reason, and I would argue that the Hindenburg Omen is getting a lot of attention precisely because people are looking for reasons to fight against the tide of pessimism. -- Written by Eric Rosenbaum from New York.
Twitter and become a fan on Facebook.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV