OnBalance Volume (OBV) Analysis of Major ETFs


The on-balance volume (OBV) is an excellent tool for trend analysis. We are applying it on five major exchange-traded funds (ETFs). These ETFs tracks broad asset classes and have reliable volume data, making them ideal candidates for OBV analysis.

The chart setup is the same for all five ETFs we are looking at. It includes a 233-period weighted moving average (WMA) of price and another WMA on OBV. Price is in the top panel and the OBV WMA is in the bottom panel. The background color reflects the slope of the WMAs.

When both WMAs slope up, the market is bullish. When both WMAs have negative slope, the bears are moving in. The tricky part lies in ignoring minor fluctuations.

Read: OBV Trading Strategy

US Large Cap – SPY

  1. Volume struggled to confirm the bull trend.
  2. Eventually, OBV rose together with price as a healthy bull run developed.
  3. There was some recent minor weakness in OBV. However, price is still going strong. So, there is no real sign of bearishness.

Foreign Large Cap – EFA

  1. OBV gave a solid early signal of recovery.
  2. EFA has been in a healthy bull trend.
  3. EFA is also a large cap ETF like SPY. Hence, it is not surprising that it experienced a minor weakness in OBV similar to SPY.

Gold – GLD

  1. This was the first confirmed sign of an impending bear trend.
  2. OBV analysis gets interesting when there are divergences. However, the trend of GLD price has generally agreed with that of OBV.
  3. GLD is in a solid bear run.

Bonds – BND

  1. OBV gave early warning of the end of the bull trend.
  2. BND has been in a sturdy down trend.
  3. However, recently, OBV started rising. This is a noteworthy development that hints at money flowing back into the bond market.

REITs – VNQ

  1. VNQ had a nice bull run.
  2. However, after a sharp drop around May 2013, prices has been erratic.
  3. We look to OBV for clarity. The trend of OBV hinted at a bearish market. However, recently, the bears showed signs of being spooked. Note that price is still trapped within the wide sideways trading range.

OBV Analysis of ETFs

We focused on the trend of price and OBV to interpret the markets, as volume provides a valuable dimension into the markets.

Add in classic chart patterns and major support/resistance levels for a more robust analysis.

Learn: How to Use Support & Resistance in Your Trading

For more information on the ETFs we covered, you can refer to ETFDB.

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