• 525 days Will The ECB Continue To Hike Rates?
  • 526 days Forbes: Aramco Remains Largest Company In The Middle East
  • 527 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 927 days Could Crypto Overtake Traditional Investment?
  • 932 days Americans Still Quitting Jobs At Record Pace
  • 934 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 937 days Is The Dollar Too Strong?
  • 937 days Big Tech Disappoints Investors on Earnings Calls
  • 938 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 940 days China Is Quietly Trying To Distance Itself From Russia
  • 940 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 944 days Crypto Investors Won Big In 2021
  • 944 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 945 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 947 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 948 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 951 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 952 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 952 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 954 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Old School TA - It's Working

We knew it was only a matter of time, but old school technical analysis - like looking at volume - is working. One of the hallmarks of the rally since August, 2010 was that the only analysis that mattered was to buy every dip no matter what. Just buy, the Fed has your back. I am sure more than one person said, "this stuff doesn't work anymore." Don't worry Mr. Market has a way of punishing those who take their eye off the ball, and just when you decide to ignore an important indicator or data point, suddenly it becomes the indicator to watch.

For those paying attention and who did not give up on "old school", there has been significant distribution going on in this market since February, 2011. In other words, greater the majority of the above average volume days have been down days. Since February 18, there have been 76 trading days, and 24 of those have been down days on above average volume. By comparison, there have been 11 trading days that were positive on above average volume. Figure 1 is a daily chart of the S&P Depository Receipts (symbol: SPY) with volume bars in the lower panel. The late February, early March distribution is identified with the gray oval, and the recent down slide is identified by the gray rectangle. The selling on increasing volume is undeniable.

Figure 1. SPY/ volume/ daily

To look at the volume pattern in a different light, figure 2, a daily chart of the SPY, shows the on balance volume indicator (in green) with its 40 day moving average (in blue). The OBV is not only below its 40 day moving average, but the moving average has rolled over. The OBV indicator made a high in late February, 2011 (point 1 on chart) and has been trending lower since. It is lower than the March low, but price has yet to breach this level.

Figure 2. SPY/ OBV/ daily

In sum, old school TA is working. Whether it is back in vogue or not is debatable, but just when the majority investors catch on the market will serve up another curve ball.

 


For the record and as a matter of a promotional plug, our Premium Content service shows these graphs and provides this kind of analysis on a consistent basis. To learn more, click here.

 

Back to homepage

Leave a comment

Leave a comment