Some of you may have caught this piece from The Wall Street Journal online edition yesterday. It fits perfectly into our recent discussion regarding the fallacy of prediction. The premise of the article was so far out there that it caught my eye (likely the desired intention). It is very difficult to take logic and reasoning like this seriously. I realize that I should take postings like this with a grain of salt, but when it comes from The Wall Street Journal - I have to throw the flag.
In case you missed it, here is a portion of the article;
Technical Gauge and Its Creator Sense Stock Gloom; 'Good Conspiracy Theories'?
Forget about Friday the 13th. Many on Wall Street took to whispering about an even scarier phenomenon -- the "Hindenburg Omen."
The Omen, named after the famous German airship in 1937 that crashed in Lakehurst, N.J., is a technical indicator that foreshadows not just a bear market but a stock-market crash. Its creator, a blind mathematician named Jim Miekka, said his indicator is now predicting a market meltdown in September. Wall Street has been abuzz about whether the Hindenburg Omen will come to bear, with some traders cautioning clients about the indicator and blogs pondering all the doom and gloom. But Andrew Brenner, managing director at Guggenheim Securities, told his clients: "Personally, it sounds like [people] are starting their weekend drinking early."
Technical indicators, with names like "The Death Cross" and "The Bearish Abandoned Baby" have been attracting mainstream attention in recent months. Amid an increasingly volatile market, investors have been searching for any clues about stocks' direction, especially this past week where major indexes fell more than 3%.
"We always love good conspiracy theories," said Joseph Battipaglia, chief market strategist of the private-client group at Stifel Nicolaus. But he noted that market watchers sometimes make too much of what could be mere coincidences. "I for one dismiss all these things because they usually erupt most numerously during bear markets."
Mr. Miekka came up with the Omen in 1995 as a way to predict big market downturns, developing a formula that parses data like 52-week stock levels and the moving averages of the New York Stock Exchange. He said the Hindenburg Omen's name was coined by a fellow market technician, Kennedy Gammage, when they found out the name "Titanic" already had been taken.
The confluence of data used by the Omen was officially tripped this week. There were 92 companies that hit new 52-week highs on Thursday, or 2.9% of all companies traded on the New York Stock Exchange. There were also 81 new lows, or 2.6% of the total. Each number must exceed 2.5% for the Omen to occur, according to Mr. Miekka
Other criteria include a rising 10-week moving average for NYSE and a negative McClellan Oscillator, a technical indicator that measures market fluctuations. Mr. Miekka said the appearance of one signal is usually an indication of a market top, but the Omen becomes more accurate when there are two or more close together.
The Omen was behind every market crash since 1987, but also has occurred many other times without an ensuing significant downturn. Market analysts said only about 25% of Omen appearances have led to stock-market declines that can be considered crashes.
Are we really that desperate for meaningful financial content? Let the madness continue and God Bless freedom of the press.
In case you missed it, here is a portion of the article;
Technical Gauge and Its Creator Sense Stock Gloom; 'Good Conspiracy Theories'?
Forget about Friday the 13th. Many on Wall Street took to whispering about an even scarier phenomenon -- the "Hindenburg Omen."
The Omen, named after the famous German airship in 1937 that crashed in Lakehurst, N.J., is a technical indicator that foreshadows not just a bear market but a stock-market crash. Its creator, a blind mathematician named Jim Miekka, said his indicator is now predicting a market meltdown in September. Wall Street has been abuzz about whether the Hindenburg Omen will come to bear, with some traders cautioning clients about the indicator and blogs pondering all the doom and gloom. But Andrew Brenner, managing director at Guggenheim Securities, told his clients: "Personally, it sounds like [people] are starting their weekend drinking early."
Technical indicators, with names like "The Death Cross" and "The Bearish Abandoned Baby" have been attracting mainstream attention in recent months. Amid an increasingly volatile market, investors have been searching for any clues about stocks' direction, especially this past week where major indexes fell more than 3%.
"We always love good conspiracy theories," said Joseph Battipaglia, chief market strategist of the private-client group at Stifel Nicolaus. But he noted that market watchers sometimes make too much of what could be mere coincidences. "I for one dismiss all these things because they usually erupt most numerously during bear markets."
Mr. Miekka came up with the Omen in 1995 as a way to predict big market downturns, developing a formula that parses data like 52-week stock levels and the moving averages of the New York Stock Exchange. He said the Hindenburg Omen's name was coined by a fellow market technician, Kennedy Gammage, when they found out the name "Titanic" already had been taken.
The confluence of data used by the Omen was officially tripped this week. There were 92 companies that hit new 52-week highs on Thursday, or 2.9% of all companies traded on the New York Stock Exchange. There were also 81 new lows, or 2.6% of the total. Each number must exceed 2.5% for the Omen to occur, according to Mr. Miekka
Other criteria include a rising 10-week moving average for NYSE and a negative McClellan Oscillator, a technical indicator that measures market fluctuations. Mr. Miekka said the appearance of one signal is usually an indication of a market top, but the Omen becomes more accurate when there are two or more close together.
The Omen was behind every market crash since 1987, but also has occurred many other times without an ensuing significant downturn. Market analysts said only about 25% of Omen appearances have led to stock-market declines that can be considered crashes.
Are we really that desperate for meaningful financial content? Let the madness continue and God Bless freedom of the press.
