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The Hindenburg Omen & SEO Cowboys

by The Wrinkle | September 10, 2010

In recent market activity the “chartists” have had a bit of excitement, as there have been both “Death Crosses” and a Hindenburg Omen appearing in the US charts. A lot of people have heard of death crosses, this is were on a daily chart a 50 day moving average moves below a 200 day average, or on a weekly chart a ten week moving average crosses under a 30 week moving average.

The Wrinkle hadn’t heard of the Hindenburg Omen before (obviously named after the 1937 airship disaster), it’s based on five US centric technical and trading measures (if you’re interested in the detail, please Google away) that is supposed to occur prior to a material fall in the markets.

It was developed in 1976 by a guy called Jim Miekka, the editor of US stock market newsletter The Sudbury Bull & Bear Report, he is saying it occurred on August 12, 20, 24, 25 and 31 this year.

Going all the way back to 1978, Jim Miekka says there have been 46 Hindenburg Omens – not counting repeats within 30 days – and only six “notable” market drops: in 1982, 1987, 1990, 1998, 2000 and 2007–2009. All of these were signaled by Omens, which preceded the market low points by 18 to 60 days.

Miekka does not claim the Hindenburg Omen as a guarantee of a crash, but says historical data shows that the probability of a downward move greater than 5 per cent occurring after a confirmed Hindenburg Omen is 77 per cent.

Now as one of my colleagues used to say on a regular basis “I’m just a simple country boy” so please explain to the Wrinkle how 6 “notable” drops from 46 occasions gives you a confidence factor of 77%. (Hint: To give Jim the benefit of the doubt it must lie somewhere in the gap between >5% and the definition of notable)

There is no question that chartists can influence markets, and the media love a short, punchy headline, but as always it’s worth taking a good look behind the headlines. For my part the Wrinkle’s group of those practicing the “black arts” extends to chartists, astrologers, and SEO providers. Or to be a little kinder there is often more art than science in the interpretation of the results they produce.

The Wrinkle has talked before about CFD providers and those who are market makers setting their own prices and those who actually trade your positions “on market”. The potential with the former is that there is nothing to stop the market maker leaving your position open and uncovered. So effectively the person setting the price (albeit based on the underlying market) can be taking positions against you. There is an industry term for green “newbies” who trade CFD’s with market makers, “cat meat”.

Which brings us to SEO; there are two elements to SEO, organic rankings within Google and paid promotion activities such as Adwords to get leads. For our part at SiteSuite we have extensive tools built into our software to allow clients to build up their own “organic” ranking, they are then at liberty to run their own Adword campaigns or to use a third party provider.

The Wrinkle has heard the odd rumour that a handful of SEO providers prefer to focus strongly on Adword spend and other billable services, with organic SEO a much lower priority. There is a lot of money being spent on SEO at the moment, so the reasons for this approach are rather obvious, and there are always a few fringe “cowboys” in any industry. So, as in all things be careful, no one wants to be “cat meat”.

Have a good week.

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