The Cumulative Volume Index

The Cumulative Volume Index (CVI) measures the flow of money both into and out of the market. Since it takes increasing buying pressure to drive stock prices higher, an ascending CVI is important in sustaining a market advance.

Big money traders - including institutional investors - often use the cover of high prices to liquidate stocks to less knowledgeable investors. Thus, if the CVI does not confirm a new upward price movement after a period of rising prices, such a non-confirmation may indicate "distribution" by these professionals.

Professional investors seek to accumulate stock at low prices when the public is withdrawing from the market in discouragement. The CVI can provide a valuable indication of hidden market strength when it establishes or maintains upward momentum, while other market measures are neutral or lower.

The general rule here is: "price follows volume."

The CVI is a cumulative total of the difference between up-volume and down-volume. It is calculated by adding the volume of advancing stocks and subtracting the volume of declining stocks from a running total.

The formula for doing this is: CVI = (USV - DSV) + IND

Where:

USV = Upside Volume in millions of shares
DSV = Downside Volume in millions of shares
IND = The Value of the CVI yesterday

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