The Hindenburg Omen was triggered last week when the steep drop of U.S. stocks raised fears of a more severe sell-off ahead. The indicator is named after the airship Hindenburg that crashed in Lakehurst, N.J., in 1937.

However, a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down, although every Wall Street Crash since 1985 has been preceded by a Hindenburg Omen. If nothing else traders on Wall Street will sit up and pay attention to this key indicator.

Hindenburg Omen occurs when a large number of companies in the New York Stock Exchange reach highs and lows in 52 weeks. Hindenburg Omen last touched the stock exchange in October 2008.

On Friday, the Standard & Poor’s Index completed its biggest three-day decline since July in the wake of unexpected increase in unemployment claims that added to the evidence that an economic recovery is slowing down.

According to Albert Edwards, a London-based strategist the Hindenburg Omen suggests that a savage equity downturn is imminent.
Theoretically, the number of stocks at a one-year high must not be more than twice the number marking low and Hindenburg Omen is only valid in a rising market.

One of the analysts said that Hindenburg Omen is an interesting name but it indicates a classic distribution phase in the market and it is a classic tug of war between the bulls and bears in the market.

The Hindenburg disaster took place on Thursday, May 6, 1937, as the German passenger airship LZ 129 Hindenburg (Luftschiff Zeppelin) caught fire and was destroyed as it was attempting to dock with its mooring mast at the Lakehurst Naval Air Station near the borough of Lakehurst, New Jersey.

Of the 97 people on board, 35 people died in addition to one fatality on the ground.

The disaster was the subject of spectacular newsreel coverage, photographs, and Herbert Morrison's recorded radio eyewitness report from the landing field, which was broadcast the next day.

The actual cause of the fire remains unknown, although a variety of theories have been put forward for both the cause of ignition and the initial fuel for the ensuing fire.

The accident served to shatter public confidence in the giant, passenger-carrying rigid airship, and marked the end of the airship era.