BB, Peter Eliades e-mailed me info on the Hindenberg indicator
Here is his response.
I believe the gentleman who discovered it is Jim Miekka. The indicator has
been publicized by Kennedy Gammage of the Richland Report newsletter. It is
an offshoot of Norm Fosback's High-Low Logic Index which looks for the same
type configuration with weekly new highs and new lows. Fosback takes the
lower of weekly 52 week highs and lows and divides it by the number of issues
traded for the week. He then keeps an exponential 10 week MA of that figure.
When it reaches 4.5%, it theoretically gives a sell signal. Gerald Appel has
added that he feels any single week reading above 7% (or is it 7.5%-I'm not
sure) is also a sell signal. As to the Hindenburg itself, there are other
requirements besides the simple ones you have given. The McClellan Oscillator
must move below zero after the calculations and parameters you give are met
in order to trigger the signal. To say the market crashes within a week after
the Hindenburg is seen is a gross exaggeration. There have been some
significant declines after Hindenburg signals, but there have been several
non events also. The last non event was on January 29 of this year and before
that on December 22, 1998. Interestingly, the preliminary Hindenburg signals
had been given on September 30, 1998, and the McClellan Oscillator went below
zero on October 5, setting up the possibility of a sharp decline/crash. The
Dow never closed lower than October 5 through today. The Hindenburg did give
preliminary signals in June-July 1998. The first confirmed signal came on
July 21, 1998 (confirmed by seeing the McClellan Oscillator go below zero),
and it was perfectly timed. Whether it led to crash-like behavior or not is
open to debate. It is, at best, a faulted indicator and like so many others
lately has been giving its share of "false negatives."
Peter Eliades
Stockmarket Cycles
Alas, another indicator relegated to the huge junkpile of broken
signals and systems caused by the mania phase of this bull market.
--earlier post to you on what the parameters might be
127.0.0.1:3456/SI/~wsapi/investor/reply-8850205
JOhn |
