On a couple of occasions you mention the Hindenburg Omen. Do you think it’s useful for precious metals investors? If so, do you include it in your analysis?
First of all, we’ll explain what the Hindenburg Omen (its name comes from the Hindenburg catastrophe of May 6, 1937, when the German Zeppelin Hindenburg was destroyed) is. Without going into details - this is a rather sophisticated technical indicator that is based on the number of stocks that formed a new 52-week high, and that reached a 52-week low. Other exchanges can be used, but typically NYSE is. The idea is that when there is a large number of both new lows and new highs on the market, then there is a high probability of a big downswing in the market in the following several weeks/months.
Therefore, the Hindenburg Omen is a long-term indicator, not necessarily a short-term one. We would like to state that we see the logic behind this indicator as credible. We have not tested/verified the accuracy of this indicator ourselves, but the reason is that... We've come to the similar conclusion on our own regarding the precious metals market a couple of years ago. During the development of our SP Gold Stock Extreme Indicator, we noticed that while our road toward similar calculations was different, the main point remained in line with that of the Hindenburg Omen. Namely, that the ratio between “top” PM stocks and the rest may behave specifically around bottoms and tops. The idea is that we take a look at the divergence between leading and lagging stocks (just like in the case of the Hindenburg Omen calculations) - when it's huge, the indicator flashes an "extreme" signal.
To answer to the initial question in short words: we do not use the Hindenburg Omen directly but our SP Gold Stock Extreme Indicator is based on similar assumptions.
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