BubbleOmics: Hindenburg Omens are a load of Mumbo-Jumbo

Apparently there has been another Hindenburg Omen sighted, and apparently also one of those has preceded every US stock market crash since 1985. 

Robert McHugh has a table that proves that.

I’m a bit confused by the last entry which says that the first new set of Omens started in December 2008 and there wasn’t a crash since then.

Well actually the DJIA went down 22% from then, but perhaps that was just a “correction”.

This is a chart comparing the numbers of Omens sighted with the final decline, using the data provided by McHugh (and the alternate).: 

 

There is no correlation at all, although the shape of the “best-fit” appears to suggest that if no Hindenburg Omens are sighted the likely size of the crash that follows will tend towards infinity. Plotting that data another way:

 

OK 44% R-Squared is not nothing; but it’s not a lot. But if you buy the idea that the decline of 22% from December 2008 to March 2009 was a separate “crash”, then since then one Omen has been sighted, just recently (apparently none were sighted before the recent 16% decline), so  “well we just had a “sighting” so it’s pretty unlikely there will be a crash of more than 20% for at least two months, if that is a valid predictor. 

Another explanation is that the Omen is just a load of Mumbo-Jumbo. Markets crash precipitously when they are in a bubble, that’s when the price is above the fundamental value (International Valuation Standards Calls that Other Than Market Value).

 

Here’s another way of looking at that:

 

 The explanation for why that works is at:

• http://www.marketoracle.co.uk/Article10604.html
• http://www.marketoracle.co.uk/Article9131.html
• http://www.stockopedia.com/content/the-seven-immutable-laws-of-bubbles-33459/

That logic (called Bubbleomics) predicted (like in advance):

1: S&P 500 would bottom at 675

2: Then it would bounce

3: All the way until it reached 1200

4: Then it would go down 15% to 20%. 

Oh and by the way, there were only FOUR predictions; i.e. four out of four. The same logic says about the impending “mother of all crashes” to dwarf all crashes:

“Don’t be so silly”!