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 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 chart displays a hi-low-close chart with a
The PVI is calculated as follows:
If today's volume is greater than yesterday's volume
If today's volume is less than or equal to yesterday's
Because rising prices are usually associated with
rising volume, the PVI usually trends upward.