The Hindenburg Omen is a combination of technical factors that attempt to measure the health of the NYSE, and by extension, the stock market as a whole. The goal of the indicator is to signal increased probability of a stock market crash.
The rationale is that under "normal conditions" either a substantial number of stocks may set new annual highs or annual lows, but not both at the same time. As a healthy market possesses a degree of uniformity, whether up or down, the simultaneous presence of many new highs and lows may signal trouble.
..."Warning: Do not go short the farm! We now have to factor in that the Fed is pumping liquidity to prevent crashes once these signals occur. And now that they have hidden M-3, we cannot even monitor how much liquidity they are supplying to the Plunge Protection Team. So you do not want to go short the farm...."
from Savehaven "The April 2006 Hindenburg Omen Has Now Been Confirmed"
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