Positive Volume Index

[Leth]

Positive Volume Index

The Positive Volume Index was introduced (in Stock Market Logic) by Norman Fosback and is often used in conjunction with Negative Volume Index to identify bull and bear markets.

Positive Volume Index is based on the assumption that the uninformed crowd dominates trading on active days. Negative Volume Index assumes that the smart money dominates trading on quiet days.

Positive Volume Index highlights days when volume is up on the previous day. Negative Volume Index highlights days when volume is down.

Trading Signals

Fosback maintains that there is a 67% probability of a bear market when Positive Volume Index is below its 1 year moving average. The probability drops to 21% when PVI is above the moving average.

Positive Volume Index crossing to below its one year moving average confirms the approach of a bear market.

Example

Procter & Gamble with Blue Positive Volume Index Light Blue 9-day exponential moving average (fast MA) and Red 255-day exponential moving average (slow MA).

pg%20positive%20volume.png

-Fast MA crosses to below the slow MA. Bear signal [-].
-Fast MA crosses back to above the slow MA. End of bear signal [+].
-Indicator smoothing (the fast MA) eliminates several whipsaws from the Positive Volume Index.

Setup

The default setting for the exponential moving average is 255 days.