The S&P 500 closed at an all-time high of 1,709 two Fridays ago, but has since
struggled to break through 1,700 again.
The chopping trading activity has repeatedly generated a pattern that stock market chartists call the Hindenburg Omen.
And as you can tell, it’s an ominous omen that portends market crashes.
Art Cashin, UBS Financial Services’ director of floor operations, writes about the recent omens in hist note this morning (emphasis added):
Can an Omen Turn Ominous? Look! Up In The Sky — Is It A Bird; A Plane — No It’s That Guy Hindenburg Again — There have been multiple occurrences of the Hindenburg Omen in the last several weeks. To assess lets turn to a dispassionate respected veteran — Jason Goepfert of SentimenTrader:
Sometimes a topic in the market takes hold and it’s hard to shake it off. One of those is the technical “market crash” signal called the Hindenburg Omen.
It has its boosters and its detractors, and we’re not going to get caught up in debating its merits. We’ve discussed it for 12 years, always with the same arguments.
On June 10th, we outlined the market’s historical performance after suffering at least 5 signals from the Hindenburg Omen within a two-week period. Stocks were consistently weak afterward, and proved to be so again, at least for a while.
With the latest market rally, the Omens are flaring up again. There have been 5 Omens triggered out of the past 8 trading sessions (your data may vary – we’re using the same sources we’ve always used for historical data). That’s actually the closest-grouped cluster since early November 2007.
It’s extremely rare to see as many Omens occurring together as we’ve seen over the past 50 days. The last time was prior to the bear market in 2007. The time before that was prior to the bear market in 2000.
Two precedents don’ts make a pattern, but that sure makes that “check engine” light glow much, much brighter.
U.S. markets open in a few minutes. Dow and S&P futures are in the red.