Technical Analysis from A to Z
by Steven B. Achelis
POSITIVE VOLUME INDEX
Overview
The Positive Volume Index ("PVI") focuses on days where the volume increased from the previous day. The premise being that the "crowd" takes positions on days when volume increases.
Interpretation
Interpretation of the PVI assumes that on days when volume increases, the crowd-following "uninformed" investors are in the market. Conversely, on days with decreased volume, the "smart money" is quietly taking positions. Thus, the PVI displays what the not-so-smart-money is doing. (The Negative Volume Index, displays what the smart money is doing.) Note, however, that the PVI is not a contrarian indicator. Even though the PVI is supposed to show what the not-so-smart-money is doing, it still trends in the same direction as prices.
The following table summarizes NVI and PVI data from 1941 through 1975 as explained in Stock Market Logic, by Norman Fosback.
| Table 11 | |||
| Indicator | Indicator Relative to One-Year Moving Average | Probability that Bull market is in Progress | Probability that Bear market is in Progress |
|---|---|---|---|
| NVI | Above | 96% | 4% |
| PVI | Above | 79% | 21% |
| NVI | Below | 47% | 53% |
| PVI | Below | 33% | 67% |
As you can see, NVI is excellent at identifying bull markets (i.e., when the NVI is above its one-year moving average) and the PVI is pretty good at identifying bull markets (when the PVI is above its moving average) and bear markets (i.e., when the PVI is below its moving average).
Example
The following chart shows the NVI, the PVI, and the Dow Jones Industrial Average ("DJIA") over a four year period (weekly data).
I labeled both the NVI and PVI indicators bullish or bearish depending on if they were above or below their 52-week moving averages.
I then labeled the DJIA as Bullish when either the NVI or PVI was above its moving average, and as Very Bullish when both the indicators were above their moving averages.
Calculation
If today's volume is greater than yesterday's volume then:
If today's volume is less than or equal to yesterday's volume then:
Because rising prices are usually associated with rising volume, the PVI usually trends upward.
Contents
- Preface
- Acknowledgments
- Terminology
- To Learn More
- Bibliography
- About the Author
- Technical Analysis
- Price Fields
- Charts
- Support & Resistance
- Trends
- Moving Averages
- Indicators
- Market Indicators
- Line Studies
- Periodicity
- The Time Element
- Conclusion
- Absolute Breadth Index
- Accumulation/Distribution
- Accumulation Swing Index
- Advance/Decline Line
- Advance/Decline Ratio
- Advancing-Declining Issues
- Advancing, Declining, Unchanged Volume
- Andrews' Pitchfork
- Arms Index
- Average True Range
- Bollinger Bands
- Breadth Thrust
- Bull/Bear Ratio
- Candlesticks - Japanese
- CANSLIM
- Chaikin Oscillator
- Commodity Channel Index
- Commodity Selection Index
- Correlation Analysis
- Cumulative Volume Index
- Cycles
- Demand Index
- Detrended Price Oscillator
- Directional Movement
- Dow Theory
- Ease of Movement
- Efficient Market Theory
- Elliott Wave Theory
- Envelopes (Trading Bands)
- Equivolume/Candlevolume
- Fibonacci Studies
- Four Percent Model
- Fourier Transform
- Fundamental Analysis
- Gann Angles
- Herrick Payoff Index
- Interest Rates
- Kagi
- Large Block Ratio
- Linear Regression Lines
- MACD
- Mass Index
- McClellan Oscillator
- McClellan Summation Index
- Median Price
- Member Short Ratio
- Momentum
- Money Flow Index
- Moving Averages
- Negative Volume Index
- New Highs-Lows Cumulative
- New Highs-New Lows
- New Highs/Lows Ratio
- Odd Lot Balance Index
- Odd Lot Purchases/Sales
- Odd Lot Short Ratio
- On Balance Volume
- Open Interest
- Open-10 TRIN
- Option Analysis
- Overbought/Oversold
- Parabolic SAR
- Patterns
- Percent Retracement
- Performance
- Point & Figure
- Positive Volume Index
- Price and Volume Trend
- Price Oscillator
- Price Rate-of-Change
- Public Short Ratio
- Puts/Calls Ratio
- Quadrant Lines
- Relative Strength, Comparative
- Relative Strength Index
- Renko
- Speed Resistance Lines
- Spreads
- Standard Deviation
- STIX
- Stochastic Oscillator
- Swing Index
- Three Line Break
- Time Series Forcast
- Tirone Levels
- Total Short Ratio
- Trade Volume Index
- Trendlines
- TRIX
- Typical Price
- Ultimate Oscillator
- Upside/Downside Ratio
- Upside/Downside Volume
- Vertical Horizonal Filter
- Volatility, Chaikin's
- Volume
- Volume Oscillator
- Volume Rate-of-Change
- Weighted Close
- Williams' Accumulation/Distribution
- Williams' %R
- Zig Zag