The Hindenburg Omen is said to predict when the stock market is headed for a crash, and market experts say they’re seeing a lot of the ominous signs lately.
The Hindenburg Omen is a combination of factors measuring the health of stocks traded on the New York Stock Exchange, and is triggered if a certain number of these stocks hit new highs and lows at the same time. The omen is said to predict when there is a high likelihood of a crash.
That’s exactly what market experts have been seeing lately.
“There have been multiple occurrences of the Hindenburg Omen in the last several weeks,” said Art Cashin, the director of floor operations at UBS, in his morning note.
The omen was cited in 2007, when the housing market bubble was near its bursting point just before American economy would be thrown into turmoil.
But the Hindenburg Omen does not necessarily mean a crash will happen, iSPYETF points out. Though the factors have sometimes lined up correctly to predict a market crash, there have been some other bad misses for the omen.
But Jason Goepfert, an analyst with SentimenTrader, notes that the Hindenburg Omen seems stronger now than in many instances in the past.
“With the latest market rally, the Omens are flaring up again,” he wrote. “There have been 5 Omens triggered out of the past 8 trading sessions (your data may vary-we’re using the same sources we’ve always used for historical data). That’s actually the closest-grouped cluster since early November 2007.”
“It’s extremely rare to see as many Omens occurring together as we’ve seen over the past 50 days. The last time was prior to the bear market in 2007. The time before that was prior to the bear market in 2000.”
Though market experts are still looking at the latest Hindenburg Omen with caution, they say they are heeding the warnings.