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Analyst predicts another US market crash next month

business Updated: Aug 22, 2010 12:53 IST

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Storm clouds are gathering over the US market with a renowned American analyst betting on a huge crash next month.

The crash prediction was made after 'Hindenburg Omen' --named after an ill-fated German plane that crashed in 1937--was sighted on the technical charts by Jin Miekka, who is credited with making several accurate market-linked forecasts before.

The 'plane of bad omen' is now a euphemism for a crash much bigger than just a bearish trend.

Based on a study of technical trends, Miekka predicts the meltdown could be in September.

Wall Street has been abuzz over whether the Omen, for which names like Titanic--after the luxury liner that sank on its maiden trip--was also in contention but discarded because it has already been used, would come true.

Amid an increasingly volatile US market, investors have been searching for any clues about stock's direction, especially in the past week where major indices fell more than three per cent.

There were 92 companies that hit new 52-week highs on Thursday (August, 14), or 2.9 per cent on the New York Stock Exchange. There were also 81 new lows, or 2.6 per cent of the total. Each number must exceed 2.5 per cent for the Omen to occur.

Marketmen in India, meanwhile, say Hindenburg threat is far from its shores.

Bourses here are aflush with FII investment and, according to analysts, there has not been a single day since July when Foreign Institutional Investors (FIIs) have turned net sellers.

"When bears cannot control the markets, they have to come out with some theories -- be it is charts, patterns, astrological fall or even theoretical envisaged corrections," CNI Research Kishore P Ostwal said.

Other criteria for the Omen to occur include a rising 10-week moving average for New York Stock Exchange (NYSE) and negative Mc-Clellan Oscillator, a technical indicator measuring market volatility.

Many FIIs feel that even the Indian markets are expensive at the moment.

Analysts are not ruling out correction of eight to 10 per cent before the start of the next wave in the market.

"We believe that there is no case of reversal of market, though chances of correction always looms large. Every dip should be used as an opportunity to invest till the end of December 2014," analysts feel.

There are no signs of Indian markets being in overbought zone, they said.

Investors may continue in their exercise of value picking. With the government on a sell-off spree till March 2011, its policies are likely to remain market friendly.