The stock market is jittery these days with investors perpetually nervous about, well, everything. The news of the Hindenburg Omen being a possibility isn’t helping provide confidence.

The Hindenburg Omen is a predictive event based on chart analysis that is decidedly bad. It has preceded a number of the major plummets that have shaken the stock market to its core. The fact that the technical analysis of the market shows we may be on the cusp of having a Hindenburg profile is scaring a lot of people, but why? 

What is the Hindenburg Omen? It was created by mathematician Jim Miekka. He describes it as the ominous clouds seen before a tornado touches down and wreaks havoc on innocent trailer parks everywhere! Four elements must exist for it to be declared:

1. 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% of total NYSE issues traded that day.

2. The NYSE's 10-week moving average is rising.

3. The McClellan Oscillator (a technical measure of "overbought" vs. "oversold" conditions) is negative on that same day.

4. New 52-week highs cannot be more than twice the new 52-week lows. This condition is absolutely mandatory.

These requirements have been met two times since August 12, 2010. The market obviously has not tanked at least as of August 26, 2010. This would bear out the simple fact that presence of the Hindenburg Omen has only been accurate 25 percent of the time. That would suggest it isn’t a very accurate predictor, but it also isn’t a horrible rate. The fact the event keeps happening suggests it is more likely than not to portend a very bad day in the market. 

What does this mean to you? Well, it means you need to take a moment to consider your portfolio and evaluate the risk associated with your investments. There is no “right” answer per say to what you should do. The key is to educate yourself and make an informed choice. 

Contact us today at (800) 341-5433 or via this contact form for a no cost consultation on how to get your financial house in order in these trying times.