LIVE MARKETS-Hindenburg returns to Nasdaq

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HINDENBURG RETURNS TO NASDAQ

The Hindenburg Omen was again triggered in the Nasdaq Composite .IXIC on February 2, according to a note this week from analysts at SentimenTrader.

The Omen is "a technical indicator designed to monitor the internal health of the market, with its core logic being to capture the market's 'split' state - that is, while the index remains at a high level or rises, the number of stocks hitting 52-week highs and 52-week lows increases significantly at the same time."

While acknowledging a single instance of the Hindenburg Omen being triggered is usually "of little significance," the firm notes there has been a cluster of signals, which were triggered three times in four trading days.

By backtesting the historical performance of 29 similar signals, the firm said that after the emergence of such clusters in the Nasdaq Composite .IXIC, the average return of the index turns negative in the second to sixth months after the signal appears.

More specifically, the average return after two months is a decline of 0.4% and a decline of 4.8% after six months. In addition, the probability of positive returns within the six-month timeframe is only 39%.

(Chuck Mikolajczak)

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