I was scanning through my list of about 30 top indexes and ETFs. One thing I look at are the ‘seasonal’ charts, meaning the historical performance of the index or ETF at similar times in previous years. Nearly all the seasonal patterns are currently sideways, meaning no average gain or loss, historically, over the next few weeks. This most likely reflects a caution displayed this time every year for taking long, or short, positions in major stocks or sectors just as earnings season is getting underway.
The Gold ETF, GLD, is about the only one with an upward bias right now. Over the next 6 weeks for example, GLD has risen an average 5.4%. The only problem is GLD is a new ETF, being in existence for only 8 years. The minimum track record I pay any respect to is at least 12 years, 16 or more is preferable. GLD’s 8-year track record doesn’t interest me. But I will keep an eye on precious metal mining stocks, watching for increasing strength and technical pattern breakouts.
Not getting far with seasonal trade ideas, I just looked for anything else that stands out. I looked at various indicators on each chart, volume patterns, and found something that stood out.
On Balance Volume is an indicator that, as StockCharts.com ChartSchool describes it, “measures buying and selling pressure as a cumulative indicator that adds volume on up days and subtracts volume on down days. … It was one of the first indicators to measure positive and negative volume flow. Chartists can look for divergences between OBV and price to predict price movements or use OBV to confirm price trends.”
Every index/ETF chart I looked at showed moderate to weak OBV levels, except for one. EFA, the ETF based on the MSCI EAFE index, an index including stocks from Europe, Australia, Japan, and the Far East, was different. OBV is setting a new 2-year high:
On Forbes/ETFChannel.com, I found this comment referring to large inflows into EFA: “Looking today at week-over-week shares outstanding changes among the universe of ETFs covered at ETF Channel, one standout is the iShares MSCI EAFE Index Fund (AMEX: EFA) where we have detected an pproximate $649.3 million dollar inflow — that’s a 1.6% increase week over week in outstanding units…”
One indicator from Investor’s Business Daily that I always pay attention to is the Up/Down Volume Ratio. Up/Down Volume Ratio is the ratio of total volume on up-closing days, divided by the total volume on down-closing days, over 50 trading sessions. A value > 1.0 usually indicates more buying than selling interest, and a value < 1.0 indicates greater selling. It can function like OBV, but it provides a number that can more easily be judged and compared.
I’ve found a value >= 1.3 often accompanies a stock or ETF just breaking out, with volume bars usually showing buying overwhelming selling. Sure enough, EFA’s U/D Volume Ratio value is a high 1.6, indicating buying is significantly overpowering selling. Just for reference, I went through the other major ETFs to see how they compare:
The strongest buying is going into EFA, with EEM (Emerging Markets ETF) and XLY (Consumer Discretionary ETF) being close behind. The DIA (DJIA ETF), NDX (NASDAQ 100), XLE (Energy), and XLK (Technology) ETFs are not drawing as much interest. It seems some big money is thinking that foreign stocks are the place to be.
Of course, there’s much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, click here: www.markettamer.com/seasonal-forecaster
By Gregg Harris, MarketTamer Chief Technical Strategist
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg’s passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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