

Hindenburg Omen (Occurred Twice this Month) - prosa
http://en.wikipedia.org/wiki/Hindenburg_Omen

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ojbyrne
The consensus here was that this was drivel the first time it appeared (2 or 3
days ago).

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NathanKP
I would tend to agree, although the Hindenburg omen might easily be explained
by publicity like this submission on HN. Investors read about the Hindenburg
omen and the fact that it has occurred twice this month. They assume that a
crash is imminent, so they start selling stocks, which causes the market to
collapse.

In this way what is drivel could be made reality because too many people don't
believe it to be drivel. There are some really interesting analysis of stock
market dynamics such as this in the book "The Wisdom of Crowds" by James
Surowiecki

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raquo
Not that I'm a finance expert, but I'm uncomfortable with an indicator the
parameters of which were optimized by backtesting half a century ago.

On the other hand, a confirmed Hindenburg Omen signal occurred on Jun 16th
2008, which would be a timely warning for the following events. On yet another
hand, no word on how many such _confirmed_ signals were false alarms
historically.

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sdfx
Doesn't it say in the article that in the past, 24% of the Hindenburg Omen
were followed by a stock market crash? From the article:

 _Looking back at 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. The probability of a panic sellout was 41%
and the probability of a major stock market crash was 24%._

While the past performance is quite compelling, the criteria seem to be
extremely arbitrary.

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raquo
The "Conclusions" section of this wiki page is rather uninformative... See
[http://www.safehaven.com/article/3880/the-past-
performance-o...](http://www.safehaven.com/article/3880/the-past-performance-
of-the-hindenburg-omen-stock-market-crash-signals-1985-2005) (from external
links)

There's a table with all 22 confirmed signal clusters 1985-2005 and the
following "crashes" along with their delays. Although the phrase "25% of these
signals were followed by a market crash" is pretty impressive, when you look
at the actual definitions of crash (>15% drop), and the delays (up to 4
months) it doesn't look as exciting anymore.

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jonknee
Sometimes humans too good at seeing "patterns" for our own good.

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jokermatt999
There's a word for that:

<http://en.wikipedia.org/wiki/Paredolia>

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ANH
I've never seen anything that makes me think 'Technical Analysis' of stock
market indicators is anything more than a pseudoscience. It's fun and spooky,
but is it any better than throwing darts?

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btilly
No, it is generally complete BS. It survives on human gullibility, and the
observation by stock brokers that promoting technical analysis is good for
trading volume. A good book that addresses this _A Random Walk Down Wall St_.

That said the particular "omen" they are talking about does have some merit.
Normally there is a broad correlation between different stocks, so you don't
typically get both lots of highs and lows at the same time. (This correlation
is why the DOW, which just tracks a small number of indicator stocks, is
correlated with much broader sets of stocks.) But you can get lots of highs
and lows at the same time if the market is very volatile. Volatile markets
sometimes go down very sharply. Of course causation goes the other way. Fears
that the market could drop cause volatility, and sometimes those fears are
proven right.

That said we can and do measure market volatility directly. (For instance
every options pricing model does that.) And that gives a much more fine-tuned
predictor of risk than this "omen".

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Tichy
Funny that probably a lot of people make a living thinking in such a way,
forming complicated theories of superstition.

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davidw
It sounds like the beginning to one of those 80ies barbarian movies (I'm
thinking of The Beastmaster, which is a must-see):

"On the 10th day, the Omen foretold the coming Prophecy that the Evil Emperor
would be slain by a Child born under the Star of the Omen"

~~~
Tichy
Would be fun to see a SciFi movie based on this idea :-)

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msy
That's a hilariously small sample size for a 'model'.

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CWuestefeld
This is right up there with the similarities between Kennedy and Lincoln.

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c1sc0
Let's assume the big crash will happen before the end of this year: what do
you do? As an angel? As an entrepreneur trying to raise money? As a funded
startup with a limited runway?

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jacoblyles
OMG, let's go looking for Ms and Ws in stock price data

