The Hindenburg Omen is not a guarantee of a crash, and the five criteria that must be met for a Hindenburg trigger typically need to recur within 36 days for reconfirmation. The statistics are however very startling. Based on 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. There is a 30% probability that a stock market crash - a drop of 15%- occurring a confirmed Hindenburg Omen. For the record, the first sighting was on August 12, while the second sighting (or, confirmation) was on August 20. The last time this signal was sighted was on June 6, 2008 & again on June 17, 2008 and we all know what happened shortly thereafter (go here).
The 5 criteria of the Omen are as follows:
- 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.
- That the smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This condition is a function of the 2.2% of the total issues.
- That the NYSE 10-Week moving average is rising.
- That the McClellan Oscillator is negative on that same day.
- That 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).
12 comments:
Hi Alex,
My action against Hinderburg omen is to go for defensive counter. Can you list me five companies? Especially those stand firm even after the last two crisis.
Best regards.
AL
Hi Alex,
What do you think of the gloves counters? Do they think they are good for long term investment as a stable industry. Prices has corrected a lot since there just too many bad news (stronger Rm, higher latex prices, possibility of over capacity, etc).Thank you.
Hi Alex,
An observation. Losers outnumbered gainers by a huge margin, and yet KLCI still in positive territory.
Does this mean the index does not truly reflect the overall market sentiment?
Another observation, KLCI normally surged up drastically right before the close on most days. Why is this so?
Any review/comment on the latest Focus Point?
Hi Alex,
Good Day!
The Hindenburg Omen alert has been posted in the last week and "Nothing" happen to the World Share market[Only minor correction]. The Local Index still keep Moving Upward especially heavy counter.
I think the People don't care about the Hindenburg Omen alert and keep pushing up the Local index.
Please correct me If I am wrong.
Pls Advice.
Thank you.
Regards
Heng
Hi Alex,
Can you share your inputs on Ranhill. TQ.
Hi Ai Ling
If the Hindenburg Omen leads to a crash in US markets, would it also signal a top for that market? If this is the case, would it also coincides with a top in our market? If that's true, then we should wait & see how far the market will drop before drawing up our buy list.
Hi David Ng
The rubber glove sector has crossed the tipping point. Before this, any cost increases could be passed onto the buyers. Now, cost increases could no longer be passed on. Why? The supply of rubber glove has exceeded demand. When that happens, we can expect a vicious cycle of lower profit margin, leading to lower net profit. This would lead to lower share prices. We may have just witnessed a top for the sector. Wait for clearer signs before going into any rubber glove stocks.
Hi Kevin Soon
What you observed is quite normal. That's the blue chips would lead the recovery and the second & third liners would lead the decline. It's a case of normal human behavior. You would buy good things first and would sell them last.
Hi kenny
I don't have mush to say about Focus Point, except to note that it would cease to sell contact lens until it can comply with the law. This would lower its net profit by about RM2 million. The IPO should have been lower but was not. So the stock is now trading at a PER of 10 times its FY2009 earning after deducting profit of RM2 million from sale of contact lens. At this multiple, the stock is fully valued. Avoid.
Hi Heng
I guess some may say ignorance is bliss. To be fair, some of the stuff that technical analysts talk about does sound like the movie 2012. I don't blame them for not listening.
Hi Stephanie
Ranhill is slowly recovering after it took a big hit for its overseas projects & investment in oil exploration. For 9-month ended 31/3/2010, it made an EPS of 6.1 sen. At a close of RM0.795 yesterday, Ranhill is now trading at a PER of 10 times. That's not attractive.
Its financial position is mixed, with adequate current ratio at 1.34 times but very high gearing ratio at 1.51 times. It will have to raise capital to pay down its borrowings which stood at RM1.6 billion as at 31/3/2010.
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