Hindenburg Omen: Sighting #2 -- The End Is Nigh...Again
A second occurrence of the market-crash indicator was espied on Thursday, a week after the first sighting, on Aug. 12. Since then, the Hindenburg Omen has burst into the national consciousness as jittery investors, double-dip-recession fears, and a zealous blogging culture have conspired to transform a once-obscure technical indicator into a marker of the Zeitgeist.
A quick refresher: One of the main criteria for the Hindenburg Omen is a negative reading in something called the McClellan Oscillator, which tracks the difference between the number of stocks moving higher vs. those moving lower. If the McClellan Oscillator stays positive, there's no Hindenburg Omen.
As Real Money columnist Rev Shark points out in a blog post Friday, the Hindenburg Omen supposedly gathers credence, and predicting power, the more times it shows up -- kind of like seismic readings before an earthquake. "Some technicians regard this as confirmation of the first reading and therefore a much more dire situation," Rev Shark wrote.Other market experts suggest a grain-of-salt approach when interpreting the Hindenburg Omen. It's merely a sign that conditions might be right for a stock-market swoon, they say; it's not a predictor of such an event. As Tim McClellan, who writes an investing newsletter called the McClellan Market Report, told TheStreet earlier this week, "It's a warning sign and an investor should never use one piece of information." (McClelland's father, FYI, was the founder of the McClellan Oscillator.) Stocks were declining in late-morning trading Friday, with the Dow Jones Industrial Average off by nearly 90 points. -- Written by Scott Eden in New York Follow TheStreet.com on Twitter and become a fan on Facebook.
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