Negative Volume Index
The Negative Volume Index showsfocus on periods when volume decreases from the previous period. Theinterpretation of the Negative Volume Index is that well-informed investors arebuying when the index falls and uninformed investors are buying when the indexrises. The premise being that the smartmoney takes positions when volume decreases. This index tries to determinethe periods where trading volume hasdecreased from the previous period,
The Negative Volume Index(NVI) is used to provide buy signals ona given equity when the price is trending upward while the volume is trendingdownward. The premise behind this indicator is that price changes on highvolume days are a result of uninformed traders while price changes on decreasedvolume are due to informed traders. Increases in the NVI are taken asindicative of smart money buying into the stock. Trend reversals are indicatedby crossovers with a signal line .
Bull markets are presumed tooccur when the NVI is above its 255-period moving average. Buy (long) signalsare issued when the NVI crosses above its 255-period moving average. Sell(short) signals are issued when the NVI crosses below its 255-period movingaverage.
The interpretation of the NVIassumes that when volume increases, the crowd-following uninformed traders arein the market. with decreased volume, the money is quietly taking positions. The NVI displays what the smart moneyis doing.
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