The Hindenburg Omen

[wvojak]

What do you think of this?

The Hindenburg Omen is a stock market technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.

Supposedly happened again on the 12th of this month.

http://www.survivalistboards.com/showthread.php?t=123281

[Sparky]

These last two statements from Wikipedia sum up my impression:

Because of the very specific and seemingly random nature of the Hindenburg Omen criteria, it is possible that this phenomenon is simply a case of overfitting. That is, if one backtests through a large data set and tries enough different variables, eventually correlations are bound to be found that don't really have any predictive significance.

The fact remains that out of the previous 25 confirmed signals only 8% (two) have failed to predict at least mild (2.0% to 4.9%) declines, so it is at best an imperfect technical indicator that is a work in progress.

As for the first, I think this is a case of overfitting. As for the second, to have some predictor named "Hindenburg" that is considered validated by a 2% to 5% drop is an insult to the zeppelin disaster. Drops of that magnitude aren't much of an event.