Negative Volume Index

The Negative Volume Index or (NVI), introduced by Norman Fosback, accumulates price changes only on days when volume decreases compared to the previous day.

This indicator is based on the theory that savvy investors trade rather on low-volume days, while the mass of less informed investors flock in on high-volume days. Consequently, this indicator only takes into account price variation when volumes decrease. This variation is added to the indicator value from the previous day.

This indicator has a similar logic to the Positive Volume Index, which accumulates price changes only on days when volume increases compared to the previous day.

Calculation Method

If V < V_P:

NVI = NVIP + 100 * (C - CP) / CP

If V > V_P:

NVI = NVIP

where:

• V: today's volume
• V_P: yesterday's volume
• C: today's closing price
• C_P: yesterday's closing price

Example

Interpretation

According to Norman Fosback, there is a 95% probability that the market will be bullish when the NVI is above its 1-year Moving Average. This probability drops to 50% when the NVI is below its Moving Average. Therefore, the NVI would be more of a bullish trend indicator.