Cumulative Volume Index (CVI)

Cumulative Volume Index (CVI) is a momentum indicator that gauges the movement of funds into and out of the entire stock market. The Cumulative Volume Index is very similar to On-Balance Volume  (OBV).

Cumulative Volume Index (CVI)

Cumulative Volume Index (CVI) is a momentum indicator that gauges the movement of funds into and out of the entire stock market.

The Cumulative Volume Index is very similar to On-Balance Volume(OBV).  OBV, like the CVI, shows whether volume is flowing into or out of the market. But, OBV is calculated from a single stock price series. Therefore OBV assumes that all volume is up-volume when the stock closes higher and that all volume is down-volume when the stock closes lower.

The CVI does not have to make this large assumption, because it can use the actual up- and down-volume for the New York Stock Exchange.


Cumulative Volume Index Calculation

The Cumulative Volume Index is calculated by subtracting the volume of declining stocks from the volume of advancing stocks, and then adding this value to a cumulative total.

Cumulative Volume Index Calculation

The numeric value of the CVI is not particularly important;  only the pattern and shape are of interest.

Application of Cumulative Volume Index

The Cumulative Volume Index is interpreted in a fashion similar to OBV.  The technical analyst can start by looking at its overall trend. The CVI shows whether there has been more up-volume or down-volume and how long the current volume trend has been in place. 

Then look for divergence  betweenthe CVI and the market index.  Buy (long) signals are recommended when there is a bullish divergence between the stock price and the CVI.  Sell (short) signals are recommended when there is a bearish divergence between the stock price and indicator.

Stock chart with Cumulative Volume Index displayed below

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