As Hindenburg Omen Fades, the Golden Cross Rises

In a time of year when everyone is preoccupied with ghosts, witches (oh, sorry, was that triple witching?) and, of course, vampires, there’s been some stir over the Hindenburg Omen. We previously wrote about the Omen, a technical indicator devised by stock watcher Jim Miekka, that was supposed to be a harbinger of a market crash. But the crash, predicted for late September, never occurred; in fact, stocks are humming along quite nicely with the Dow on the rise. Miekka himself has now adopted a bullish outlook even though when his Omen kicked in he sold all his holdings and took himself out of the market.

Not only has Miekka re-entered the market, now all the fuss seems to be over the Golden Cross, another technical indicator supposed to be a predictor of a market rise and discussed in a Forbes report. Earlier in the summer, the talk centered around the Death Cross—another Hindenburg-like sign of doom that occurred in July—but the Golden Cross has apparently trumped it soundly.

The Golden Cross, says Investopedia, is “a crossover involving a security’s short-term moving average … breaking above its long-term moving average … or resistance level.” The fact that a short-term moving average has topped the long-term moving averages says to some tech types that the market “has turned in favor of the stock.”

Why didn’t the market crash after the Death Cross or, more recently, the Hindenburg Omen, and what does that mean for the Golden Cross? There are a number of theories, one of which is that media hype is responsible for warding off catastrophe. All the attention paid to the two negative technical indicators can unnerve traders to a sufficient degree to compel them to sell their holdings in advance of any potential meltdown, or to hedge their investments so that they are protected from the downside. This has the effect of dispelling the pressure to dump losing positions before the negative symbol appears, thus negating its prediction.