Although the piece contains a nice profile of the creator, Jim Miekka, the positives to the article end there:
Mr. Miekka's foray into stocks began after he was injured while conducting experiments at a Massachusetts mine, where he was trying to find a better way to extract minerals from rock. There was an explosion from chemicals he was working with, and was blinded by complications during an ensuing eye operation. "The last thing I saw was the eye chart going into surgery," he said.WSJ then blasts his indicator:
As he recuperated, Mr. Miekka said he began listening to television shows that focused on investing, and began actively putting his money into the market.
He came up with his first trading "system" in 1989...
Market indicators aren't his only inventions. He also says he created artificial-vision technology that uses sounds to help him identify targets better than m any sighted shooters. He can hit a National Rifle Association target at 100 yards, and this week he hit a bowling pin at 200 yards.
"People are grasping at straws and always looking for someone who might have all the answers," says Jeremy Siegel, finance professor at the University of Pennsylvania's Wharton School of businessSiegel, just by coincidence, according to his web site, seems to 'have all the answers." He tells us that he is the "Wizard of Wharton". Jim Cramer thinks he is God:
Jeremy Siegel is one of the great ones. [His article at the market top was] one of the most stark and prescient calls I have ever seenWhat market top is not exactly clear, that insightful fact is missing from the Cramer quote.
I highly suspect it wasn't the recent top.
You see Siegel had this to say about the economy just 4 months ago:
Yes, the recession has definitely ended. What they were more uncertain about was what month it ended, but that is quibbling about history. My feeling is that it was July or August of last year. But there is no question that we are out of it. In my opinion, we are not going to have a double dip. It is just a question of whether we are going to come out of this with moderate growth or surprisingly rapid growth.I wonder if he thinks the same now, given housing, unemployment and production are tanking? Oh well, you can't get them all.
Moving on, the other expert WSJ turns to is Barry Ritholz. Ritholz also does a heavy "analytical" attack on Miekka's indicator. He tells WSJ that it is "recession porn". Thinking that Ritholz has a desire to get in the paper and so threw out a sound bite for WSJ, and has his real analysis at his website, I turned to his web site to see the deep analytical work behind his classifying the Hindenburg Omen as "recession porn".
His complete analysis of the Hindenburg Omen is a chart that shows the term trending up in Google trends. I am not making this up. Yup, because the economy is clearly in the tank and people are trying to learn about the "Hindenburg Omen", Ritholz disses the indicator because, get this, 280 people searched for the term. You are more likely to run into someone suffering from kuru disease than you are someone who has searched for the term "Hindenburg Omen".
Ritholz is trying to indicate that because a term has become "popular" (Apparently he considers 280 searches popular) that the rule of thumb that being on the opposite side of crowds should be kicking in. Of course, any trader who has traded more than a week knows that crowds can grow very large and that they can take a very long time to reverse. Even given Ritholz's absurd implication that 280 searches in the sea of investors is a crowd, the crowd indicator as far as timing is concerned is a terrible indicator. Cash flow into the market, new highs and lows and current momentum (all part of the Hindenburg Omen) tell you a lot more. Thus, WSJ is really quoting Ritholz using a very weak indicator (the weakness amplified by the absurd tiny size of the "crowd") to diss the Hindenburg Omen which is rich in valuable data. Amazing.
Who knows if WSJ reporters have an agenda or are just clueless, from experience I know that most reporters love sound bites over analysis. There is nothing necessarily wrong with a sound bite, as long as there is analysis behind the sound bite. Ritholz has none and Siegel can't even get the direction of the economy right.
I have long been a preacher of being very careful of empirical indicators. You need to know what is behind the indicators (which I did for the Hindenburg Omen here), but you also need to know what the analytical work (or lack of it) is behind the "experts" WSJ quotes. There's zero analytical work by the "experts" in this WSJ article.