Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market OBV Chart At a Critical Juncture

Stock-Markets / Stock Markets 2013 Aug 21, 2013 - 09:50 AM GMT

By: Brian_Bloom

Stock-Markets

There is something very odd about the chart below. To understand what, it is necessary to understand how “On-Balance-Volume” charts are constructed.

Basically, if price rises during the day (today’s close is higher than yesterday’s close) then all volume of that day is treated as buying pressure. Vice versa if price end lower today than it ended yesterday. If price does not change, then volume is ignored. (As an aside, because price can be rigged on a Friday, weekly OBV charts tend to be meaningless)


The OBV chart starts at zero and buying volume is added whilst selling volume is subtracted. The technique was invented and developed by Joe Granville who concluded after years of study that “volume precedes price”. What this means is that buy signals on the OBV chart are likely to show in advance of buy signals on the price chart because “accumulation” will tend to show big volume on the upside and “distribution” will tend to show big volume on the downside. Eventually, the weight of the accumulation or distribution overcomes the propensity of sellers/buyers to sell/buy at a particular price and the price starts to move.

What is extremely odd about the first chart (courtesy Bigchart.com) is that OBV peaked in the first quarter of 2012, when the Dow was around 12,000. Right now, OBV is no higher than it was in Q1 2012 but the Dow is sitting around 15,000. (25% higher).

What this probably means is that price has been ramped up on small volume and this has allowed big volume sales to take place on small price declines without impacting on the upward price trend.

Piercing through the smokescreen, it is fair to draw the conclusion that the equity market has been “rigged” for the past 15 months.

If this is the case (and my analysis has led me to conclude that it has) then a sell signal on the OBV chart will likely be a seriously bearish sign. Why? Because the big players will be less exposed to falls in price and, indeed, may even have positioned themselves to profit from any future falls.

It needs to be recognised that the OBV chart has not yet given a serious sell signal, but it is currently resting on a trend line.

Granville argued that a warning sell signal is given when the OBV saw-tooths to a lower low and the chart below shows a close-up of Dow over the past 6 months:

Its early days yet, but in the last six months the OBV chart has never shown two lower lows. In the last couple of weeks we have seen two lower lows.

The longer term OBV chart shows a trend line dating back to 2009. This trend line is still intact, but the OBV is now resting on that trend line. If the trend line is broken (which, if the market has been rigged, will eventually happen) then this will be a sign that selling pressure is overcoming the market’s propensity to absorb the stock.

For the rising trend of Dow Index to remain intact, the OBV chart must bounce up from here.  The gold line in the above chart is the 200 day MA and the Dow is still quite far above it.

But the chart below is giving off two warning signals:

1.       The Index is below its 45 day MA

2.       The 45 day MA has turned down

Now, of course, as it did in July, the index could bounce back up again and the 45 day MA could turn up again. But this will require the OBV chart NOT to give a sell signal in the next few days.

By extension, this will require the OBV chart to bounce UP in the next few days.

All “news” is history, but the relevant history of the past few days has been as follows:

·         Egypt is moving towards Marshall Law against a background of a significant percentage of the world’s oil shipped through the Suez canal.

·         Bond Yields in the US have given a series of “buy” signals (bond prices have given sell signals)

·         There has been a subtle shift in attitude of the US towards the acceptability of pre-emptive strike action by Israel against Iran

·         The following are the lead stories in “USA Today”

The  US media seems to be asleep at the wheel.

Brian Bloom

Author, Beyond Neanderthal and The Last Finesse

www.beyondneanderthal.com

Beyond Neanderthal and The Last Finesse are now available to purchase in e-book format, at under US$10 a copy, via almost 60 web based book retailers across the globe. In addition to Kindle, the entertaining, easy-to-read fact based adventure novels may also be downloaded on Kindle for PC, iPhone, iPod Touch, Blackberry, Nook, iPad and Adobe Digital Editions. Together, these two books offer a holistic right brain/left brain view of the current human condition, and of possibilities for a more positive future for humanity.

Copyright © 2013 Brian Bloom - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Brian Bloom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules