According to Tom McClellan author of McClellan Market Report, the threat of a Hindenburg Omen could be rearing its ugly head. The omen, which was created by mathematician Jim Miekka, is an indicator that technicians often use to predict stock market crashes.In addition, Kevin Caron of Washington Crossing Advisors said to watch earnings growth.
In order for the Hindenburg Omen to hold true, says McClellan, three events must occur in the same day:
- The number of new 52-week highs and 52-week lows are greater than 2.8 percent of the advances and declines in the New York Stock Exchange.
- The NYSE Composite Index is above the level it was 50 trading days ago.
- The McClellan Oscillator (an indicator of whether a market is overbought or oversold) is below zero.
"What we're looking at is a market that has benefited mostly from rising earnings, but the improvement in those earnings seem to be slowing somewhat. We'd be a little bit mindful of that," he said.
Source: CNBC/Yahoo Finance