Below is an introductory video explaining the Hindenburg Omen, an indicator used to forecast market crashes.
The basic concepts behind the indicator are as follows:
1. Calculate the sum of stocks making new highs and new lows on the NYSE; continue if this is 2.8% or more of the stocks that moved that day
2. McClellan Oscillator should be negative
3. NYSE index should be above its 50 SMA
4. Make sure the number of new highs is NOT 2X or more the number of new lows
4. Look for multiple days when all four of the aforementioned criteria are met
The Hindenburg Omen may issue numerous false signals, but it has proven effective in forecasting big crashes. A proper trading strategy can thus possibly use the Hindenburg Omen as part of its tool set in capturing big moves.
The basic concepts behind the indicator are as follows:
1. Calculate the sum of stocks making new highs and new lows on the NYSE; continue if this is 2.8% or more of the stocks that moved that day
2. McClellan Oscillator should be negative
3. NYSE index should be above its 50 SMA
4. Make sure the number of new highs is NOT 2X or more the number of new lows
4. Look for multiple days when all four of the aforementioned criteria are met
The Hindenburg Omen may issue numerous false signals, but it has proven effective in forecasting big crashes. A proper trading strategy can thus possibly use the Hindenburg Omen as part of its tool set in capturing big moves.
by Simit Patel via InformedTrades
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