The actual Hindenburg disaster took about 35 seconds from ignition to crash. The eponymous market omen has been triggered multiple times over the last several months, starting at the end of May. Thus far the Hindenburg Omen has yet to trigger a market crash.
Naturally, believers don't regard this as any sort of proof that the technical indicator is somehow flawed. The indicator doesn't come with a specific time frame. It's more along the lines of a vague suggestion that trouble may be afoot. A quick survey of market omens and prognostications reveals that they tend to come without deadlines. That's largely because they are a function of the imagination and salesmanship more than actual markets.
"They would make an indicator based on how many times your neighbor's dog pooped on your yard if they could," says Jonathan Hoenig, founding member of hedge fund Capitalistpig. "The history of markets is that they have a tendency not to crash. The last hundred years you're looking at five or so legitimate crashes."
Through the magic of endless data mining it's easy to see in retrospect what conditions were in place prior to large market moves. In reality the data samples are too small to matter.
Market omens of doom are common because they sell books and newsletters. They have vague time frames for the same reason horoscopes give general advice. Anything specific can be debunked or confirmed. When your omen doesn't have a time frame you're never wrong, just early.
There are still people eating off having called the crash of 1987. What people forget is that the October 1987 crash came in the fifth year of the greatest bull market any of us are likely to ever see. Stocks finished that year roughly flat.
Make your own investment decisions. There isn't a magic omen or formula or trigger that will reliably predict events that come around once in a generation. Anyone who tells you otherwise is almost certainly trying to sell you something you shouldn't buy.
More from Breakout:
- Hindenburg Omen
- Jonathan Hoenig