For the 4th day this week new highs, new lows, advancers and decliners flashed an angst-prone market and triggered a Hindenburg Omen. A glimpse at Treasuries close-to-close from Friday and one might think it was a quiet week (though 30Y rallied 5bps the rest of the curve ended only modestly lower in yield) but in every other asset-class, the ‘Taper’ talk sent levered momo running for the exits… with JPY’s 2nd strongest week in 4 years the main carry-unwind driver.
Hindenburg Omen
The Hindenburg Omen is a combination of technical factors that attempt to measure the health of the NYSE, and by extension, the stock market as a whole. The goal of the indicator is to signal increased probability of a stock market crash.
The rationale is that under “normal conditions” a substantial number of stocks may set either new annual highs or new annual lows, but not both at the same time. As a healthy market possesses a degree of uniformity, whether up or down, the simultaneous presence of many new highs and lows may signal trouble.
Theoretically, the Hindenburg Omen could be applied to any stock exchange. However, some minor alterations to the omen might be needed to achieve similar results.
