One month left of positive seasonality. OBV says, “Maybe not.” | decision point

The late Yale Hirsch (Stock Trader’s Almanac) has long been credited with identifying six-month positive and negative seasonality in the stock market. The positive period is from November to April, and the negative period is from May to October. Currently we are in a positive period with one more month to go. Unfortunately, the On-Balance Volume (OBV) chart is telling us that April may not be very positive.

The chart below shows positive periods (green) and negative periods (pink), showing that the market rarely accepts such a strict schedule. Positive and negative behaviors fit loosely within these brackets, but the periods start and end when you want them to. However, the current positive period has been exceptionally accommodating, with uninterrupted positivity starting in late October and continuing through March. Can this continue for another month? Of course, that could be the case, but there are signs in the OBV chart that it could end sooner than that.

OBV (On Balance Volume) is a cumulative line that adds or subtracts from the total volume for the day depending on whether the price closes or not. Typically OBV is just check Price movement, creating lows or highs that coincide with the price movement. boring. What we look for is when OBV fails to confirm the price. A good example on the chart is from 2021, when SPY made a series of higher highs, but OBV only made a series of lower highs, failing to confirm any price movement. Basically, the price went up but the volume started to go down. It flagged three other instances where OBV failed to confirm prices, one of which was for the current period.

conclusion: There is positive and negative six-month seasonality that appears to influence price direction. During the current positive period starting in November, the stock market has been consistently positive, but looking at the OBV chart, we see a negative trend in volume. The upward price trend may soon end.

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