Positive Volume Index - PVI

The positive volume index or PVI, is an index that tells us when trading volume is increasing. The premise behind the PVI is this: the more trading volume increases, the more inexperienced newbie investors are making trades. On the flip-side, when trading volume decreases, it's because only the smart and informed investors are making trades (there’s an index for that too, and it’s called the negative volume index, or NVI; together, the PVI and NVI are called “price accumulation volume indicators," which is a mouthful).

So what does this mean for stock prices? Well, as it turns out, the PVI isn’t half bad at identifying bullish and bearish markets. When the PVI is higher than its one-year MA, or moving average, the market is bullish, and prices tend to go up. And when the PVI is below its MA, the market is bearish, and prices tend to go down. It’s not 100% reliable 100% of the time, but it’s definitely an index worth keeping in our investment toolkit.