Positive Volume Index

The Positive Volume Index or (PVI), introduced by Norman Fosback, accumulates price changes only on days when volume increases 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 increase. This variation is added to the indicator value from the previous day.

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

Calculation Method

If V is greater than V_P:

PVI = PVIP + 100 * (C - CP) / CP

If V is less than V_P:

PVI = PVIP

where:

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

Example

Interpretation

As with the NVI, the PVI can be interpreted relative to its 1-year Moving Average.
According to Norman Fosback, there is a 67% probability that the market will be bearish when the PVI is below its 1-year Moving Average. This probability drops to 21% when the PVI is above its Moving Average.

The PVI is a very good indicator for identifying bullish trends (when the PVI is above its Moving Average) and bearish trends (when the PVI is below its Moving Average).