Dow jumps...Hindenburg Omen?

A bit of a see-saw trade on the Down overnight (couldn't sleep...) but it rocketed up in the afternoon to close up 138 points or 0.92% at 15,254.

With US stocks up again, this has led some commentators to call...the Hindenburg Omen!!

What is it?

The Hindenburg Omen is a series of technical signals which is said to portend a coming stock market crash.

There are four criteria which you can read here, but the gist is that when you have stocks hitting new highs and new lows then the market is not moving in a uniform manner and therefore there is a risk of a crash.

Is it much cop?

Nah, not for mine. Whenever you have stocks hitting new highs there must exist some risk of a crash, so sometimes it may give a correct signal.

Thing is, the clock in my local gym is stuck on ten past one, and every afternoon it is right, albeit very briefly. And then it's wrong again until 1.10am (and then there's nobody there anyway, so it's useless).

Besides, the market has changed plenty since the idea was first conceived, and the 'Omen' has triggered at least half a dozen signals in the last few years that I can remember which have proved to be poppycock -which is a polite way of saying: it's BS.

One distorting factor is that indices are now loaded with ETFs - exchange traded funds.

Bond ETFs hitting new highs or lows can trigger a Hindenburg Omen signal, but one wouldn't expect bond funds to move in a correlated fashion to stocks. Far from it, in fact. 

So at the very least, the Omen should be adjusted for that. 

There may or may not be a major correction, but the last half dozen times we've had a signal you'd have lost out by selling.

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