Hindenburg Omen

I've been busy and haven't confirmed these numbers, but....at first glance it looks like these rules were met today:

The traditional definition of a Hindenburg Omen requires that:

The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day (currently, greater than or equal to 69, which is above 2.2% of 3126).

The NYSE 10 Week moving average is rising.

The McClellan Oscillator is negative on that same day.

New 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

Criteria These criteria are calculated daily using Wall Street Journal figures for consistency. (Other exchanges may be used as well.) Some have been recalibrated by Miekka to reduce statistical noise and make the indicator a more reliable predictor of a future decline. The daily number of NYSE new 52 week highs and the daily number of new 52 week lows are both greater than or equal to 2.8 percent (typically, 84) of the sum of NYSE issues that advance or decline that day (typically, around 3000)[3]. An older version of the indicator used a threshold of 2.5 percent of total issues traded (approximately 80 of 3200 in today's market). The NYSE index is greater in value than it was 50 trading days ago. Originally, this was expressed as a rising 10 week moving average, but the new rule is more relevant to the daily data used to look at new highs and lows. The McClellan Oscillator is negative on the same day. New 52 week highs cannot be more than twice the new 52 week lows (though new 52 week lows may be more than double new highs). The traditional definition requires each condition to occur on the same day. Once the signal has occurred, it is valid for 30 days, and any additional signals given during the 30-day period should be ignored. During the 30 days, the signal is activated whenever the McClellan Oscillator is negative, but deactivated whenever it is positive.[4] [edit] Possible weaknesses To eliminate false positives some technical analysts have imposed the condition that the Hindenburg Omen must be triggered three times in a row within a month from the first triggering event for said initial trigger signal to be considered to be valid (i.e. requires double confirmation) is only valid when "all tightly coupled triggerings are within a fortnight" will indicate a possible future downturn or correction, depending on the magnitude of any "one off" triggering

And, after all the calculations, there is a little problem and that is: The Omen's predictive accuracy regarding the future of the market is relatively low. anti-climatic comes to mind. I think of it as noise. It is cocktail time chatter and if you are not in a bar when it is mentioned, leave for one immediately. Go gently into the madness ! Best Islander

I've been busy and haven't confirmed these numbers, but....at first glance it looks like these rules were met today:

The traditional definition of a Hindenburg Omen requires that:

The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day (currently, greater than or equal to 69, which is above 2.2% of 3126).

The NYSE 10 Week moving average is rising.

The McClellan Oscillator is negative on that same day.

New 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

Does anyone keep track of the accuracy of this Omen (model)? How many times has it been correct and how many times has the criteria been met? What is the time-scale of the effect (when it was correct)? Without answers to these, I don't know how useful it is.

Rich

I just went through the data again and it all checks.

From WSJ/Barron's source data:

Highs: 179 (5.7% of total)
Lows: 119 (3.8% of total)
Total: 3121

Highs are less than 2X lows

ALL Rules met

Here's the NYSE index which clearly meets test either way:

http://stockcharts.com/c-sc/sc?s=$NYA&p=W&yr=3&mn=6&dy=0&i=p38785778429&a=217353530&r=8757.png

Here's McO which clearly meets the rule:

http://stockcharts.com/c-sc/sc?s=$NYMO&p=D&yr=0&mn=5&dy=0&i=p52861189019&a=199263752&r=7016.png

Rich - here's some data re your question:

Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days.

The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%.

...the occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down, although every NYSE crash since 1985 has been preceded by a Hindenburg Omen.

Edited by IYB, 14 December 2010 - 05:12 PM.

25% accuracy rate. From the WSJ.

http://blogs.wsj.com...-tripped-again/

U.F.O.

Not the same topic, but down the same line was the first daily gap was filled yesterday in the VIX from back in April. I remember saying to myself there's no way that gets filled back then. Things are lining up!

25% accuracy rate. From the WSJ.

http://blogs.wsj.com...-tripped-again/

U.F.O.

Hi UFO! Yes if you consider ONLY a MARKET CRASH as an "accurate outcome" then your 25% figure is correct. But a 25% probability of a CRASH is in my book worth noting!

Added to that, if you are consider "panic sellouts" as "accurate outcome" the accuracy rate rises to 41%. Again, in my book, worth noting. And for moderate declines, the "accuracy rate" is higher still.....

Anyhow, great to see you back here Bud. I've missed you posts. Regards, D

Thanks Don. Price lead (bad) breadth, nuff said. Probability that breadth leads price-just a little short of spectacular.

did we get one before the flash crash? Thanks IYB, interesting. I keep thinking oh something will make me go positive on the market but instead more 'stuff' comes out to makes me even more negative. This is getting silly.