The Hindenburg Omen: Is A Crash Coming?

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In July the S&P 500 index as well as several other leading indicies, put in an important technical signal, the "Death Cross" Link. Now there are those who will debate its accuracy in the direction of the underlying index, I being one. But last Thursday, traders & investors got another key technical reading...the "Hindenburg Omen" >>LINK. Again there are those who don't give this indicator validity. However, as with any indicator, one shouldn't totally dismiss it, but rather track it along with others.
The traditional definition of a Hindenburg Omen requires that: [*charts below as of August 12th, 2010]

#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 percent of total NYSE issues traded that day.

     

#2 The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 69.

#3 The NYSE 10 Week moving average is rising.
#4 The McClellan Oscillator is negative on that same day.

#5 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). This condition is absolutely mandatory.

These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen.

A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.

The Hindenburg Omen mechanism can be applied to other stock exchanges like Paris, Frankfurt, Tokyo or Sydney but the criteria for it must overall be the same.
Past performance of the Hindenburg Omen: Historal Link additional link