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The 'Hindenburg Omen': Bear Signal Scares Market

The Hindenburg burning.
Source: Wikipedia
The Hindenburg burning.

The Hindenburg—the stock market version, of course—may not have crashed into Wall Street Friday, but it certainly appeared to be circling.

Traders were abuzz in the afternoon trading session that the "Hindenburg Omen," an ominous sign that seems to pop up every few years and can signal a major market tumble, was in play.

As a result, markets sold off rapidly into the close, with the Standard & Poor's 500 down 1.43 percent and the Dow industrials tumbling more than 200 points to close off 1.36 percent.

Respected by many market veterans, the omen is triggered when, among other things, multiple stocks set new 52-week highs and lows simultaneously.

The phenomenon happens if both highs and lows are greater than 2.2 percent of the total issues that trade that day. That would translate into about 73 stocks each way.

In Friday's trading, there were 156 new lows and 90 new highs, according to Thomson Reuters.

(Read more: Jobs, That's All Wall Street Will Care About Next Week)

At its core, the Hindenburg Omen reflects market volatility—violent moves in either direction that are triggered during times of uncertainty.

Fund flows have reflected investor unease.

Last week marked 2013 lows for inflows into both stocks and bonds, while money market funds took in $13.1 billion, according to Thomson Reuters.