For the past two weeks my message inbox has been flooded with messages highlighting that recently “Hindenburg Omen Signal”, which preceded the 2008 and 2020 stock market crashes, has been triggered and a stock market collapse may be imminent. There are several other technical and strategy reports cautioning investors against an apparent bubble in the Artificial Intelligence (AI) related stocks.
Hindenburg Omen Signal: The Hindenburg omen is a technical indicator designed to signal the increased likelihood of a stock market crash. It compares the percentage of new 52-week highs and new 52-week lows in stock prices to a preset reference percentage (typically 2.2%) to predict the increasing likelihood of a market crash. The indicator is said to be suitable for about 30 days out, though it's been a false alarm more often than not in the past decade. Four criteria must be met to signal a Hindenburg omen:
· The daily number of new 52-week highs and 52-week lows in a stock market index exceeds a threshold amount (typically set at 2.2%).
· The 52-week highs can't be more than twice the 52-week lows.
· The stock market index is still in an uptrend. A 10-week moving average or the 50-day rate of change indicator is used for this.
· The McClellan oscillator (MCO), a measure of the shift in market sentiment, is negative.
How to think about the new Hindenburg Omen narrative
A common problem with the popular market discourse is that every meme indicator that worked once… becomes religion forever.
Hindenburg Omen is just a market breadth anomaly flag that is used to indicate stress emergence — not crash certainty.
Historically, some major crashes were indeed preceded by such a signal. However, false signals have massively outnumbered true signals. The probability distribution is not deterministic. Actually, it is more of a trend change watchlist input — not a trading instruction.
The more important debate now is actually different
The more important debate in my view is “Are AI stocks a bubble or are they discounting the future correctly?”
AI is now the most consequential capital allocation variable in the world — influencing geopolitics, capex, energy security, employment, corporate strategy, national strategy.
But here is the inconvenient fact for India:
· India has no pure-play AI company.
· This is not our NVIDIA moment.
· This is not our TSMC moment.
· This is not our Google / Meta / Tesla moment.
Our listed exposure is basically:
IT services riding implementation side revenue + consulting banks / logistics / enterprises consuming AI to enhance productivity So in India the AI debate is limited to “IT attrition, pricing, margins”. That is not the real debate in global markets.
The core portfolio question:
In my view the correct frame of reference for Indian investors is – “If global AI bubble were to correct — does India outperform or not?
Indian investors therefore may be better evaluating:
· October saw FII flows turn positive and several respected global strategists are talking India long duration bull. Is this early 2026 positioning?
· Have Indian valuations reached the band where global capital actually prefers to hide in India if US/AI corrects?
· If there is a global risk off — does India fall with them and rebound faster (like 2008-09)… or does India do better in BOTH the fall and the rise?
In my view, instead of predicting market crashes, and consequently taking rash decisions, we would be better off by building antifragile portfolio architecture. For example-
· Distinguishing between narrative premium vs earnings premium
· Reducing leverage dependence for performance
· Moving portfolio factor weights slightly more toward compounding engines, less to short-term momentum chasers
· Using corrections to accumulate structural compounding themes, e.g., manufacturing formalization, infra development, energy security & efficiency, domestic financial deepening and up-trading in consumption.
Conclusion
Hindenburg Omen is useful… not because it predicts a crash — but because it forces you to re-test the strength of your portfolio design under adverse breadth conditions.
It is not important to forecast whether India will underperform or outperform the global markets. The important thing is to not panic trade technical omen memes — and instead use signals like this to calmly strengthen the probability of multi-year compounding.
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