Positive Volume Index (PVI)


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 PVI:

PVI.gif (7341 bytes)

The PVI is calculated as follows:

If today's volume is greater than yesterday's volume then:

 posvolindcalc1.gif (6411 bytes)

If today's volume is less than or equal to yesterday's volume then:

posvolindcalc2.gif (280 bytes)

Because rising prices are usually associated with rising volume, the PVI usually trends upward.