But peel back those indices, and there may be room for some concern. Most sectors have struggled within the past 12 months. Some 93% of stocks in the S&P 500 have undergone a 10% correction at some point this year, according to Schwab and Bloomberg data. For the Russell 2000, the most popular index tracking small-cap equities, it’s 98%.

Bullish investor sentiment is also down, inflation is high, and the Fed is tightening up its monetary policy. The Omicron variant had markets reeling on Nov. 26.

But there’s a technical indicator that is snatching the attention of some analysts right now, and it’s called the Hindenburg Omen.

This market signal, triggered by a series of technical factors snapping into place at once, has preceded every market crash since 1987, the Wall Street Journal found in 2010 (to be sure, the Journal also found the omen emerged during many periods of market calm, and only 25% of the time preceded what you could define as a crash). A 2020 analysis by SentimenTrader found that clustering occurrences of the omen precede a market crash more often than not.

It’s not a perfect signal by any means, and some traders are skeptical of it altogether. But no indicator is perfect: It can be pretty difficult to pinpoint exactly when a market crash will happen, how long a bear market will last, or just how low the markets may sink. “No one type of indicator, whether it’s technical, breadth, or sentiment is the holy grail for gauging what the market is going to do,” Sonders tells me.

An impending market crash puts portfolios at risk, and, if nothing else, the omen can serve as a good reminder for investors to take a second look at their holdings: Have their allocations drifted into riskier territory during the bull market and need to be rebalanced? Where are we in the market cycle?

Here is what you need to know about the leery technical indicator that has emerged three times last month:

A 1937 fiery crash

Okay, what is the Hindenburg Omen? It sounds a little frightening, and that’s by design. It’s named after a German airship that crashed and burned in 30 seconds in 1937. Let’s have a look:

A little history lesson from Tom McClellan, a technical analyst and editor of The McClellan Market Report, who spoke with me for this column: 

The omen’s original iteration stems from the late market-timing expert Gerald Appel, renowned for crafting an assortment of mathematical models and indicators. One of those models tracked the number of stocks that, on a given day, would hit new highs and those that would hit new lows. The value in that, you might ask? As you might imagine, a lot of highs tend to signal an uptrend in the markets, while a lot of lows signals a downtrend. But “when you have high numbers of both of them on the same day, you’ve got something weird going on,” McClellan explains. 

Enter Jim Miekka, a brilliant mathematician who died seven years ago. He fine-tuned this rule to modernize it for the sheer number of stocks that had entered into the market since it was first crafted, and to turn it into a better predictor. 

There are three parts to it, although there has been some debate as to the specific criteria: According to McClellan, 1) New stock price highs and new lows must exceed 2.8% of the total advances and declines in the market on a given day. 2) The McClellan Oscillator, which was created by McClellan’s parents in the ’60s and measures market breadth, needs to be negative. And 3) the New York Stock Exchange composite index needs to be above whatever its value was 50 trading days ago.

Should all of these factors take place, you have the Hindenburg Omen, which serves as a “warning sign of trouble,” McClellan says. It points to liquidity problems ahead. “It doesn’t always work, but it’s worth paying attention to,” McClellan says.

That series of events all lined up into the perfect storm three times in November, McClellan points out.

“It just shows a market that is a bit out of gear,” Sonders says. While she is not convinced it necessitates a downturn, “when you get a cluster of those, it tends to be at least a warning of heightened volatility.”

All that being said, it may be a good time for investors to check up on their portfolios, and make sure their risk allocations are still intact. Particularly for new investors who may have never experienced an ongoing bear market, it’s critical to have a plan in place that will survive one.

WEEKLY CHART

JARGON, EXPLAINED 

“Technical indicator”: Technical indicators are signals based on a plethora of data, such as volume, price fluctuations, or other data points that are used by data-friendly analysts to get a better sense of where a security, index, or contract may move in the future.

NEWLY LISTED

IPOs have been slow of late, but here are a couple that have caught my eye:

• Selina, a London-based accommodation and co-living space company for remote workers, is planning to go public via a SPAC merger. It is expecting to list on the NYSE under SLNA in the first half of 2022.
• Nubank, a Brazilian neobank, is planning to IPO next week on the NYSE under NU. Pre-IPO shares are on Robinhood.

DON’T MISS THIS

Fortune’s Brainstorm Tech conference took place this week: Here’s more on what’s new in augmented reality, whether investing in Tesla can be considered impact investing, and opinions on how much the largest banks will be worth over the next five years. Also to note, there was another Ether futures ETF filing, and shares in the Trump SPAC are spiking again. Oh, and Mark Cuban just bought a whole city in Texas, as one does.

Have an investing query you’d like to see addressed? Send me your thoughts and feedback below. Thanks for reading. 

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com

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