Negative Volume Index (NVI)

Overview

The Negative Volume Index embodies one of technical analysis's most counterintuitive yet powerful insights: that smart money moves markets quietly on low-volume days. Created by Paul Dysart in 1936 while publishing his Trendway advisory letter, NVI only changes on days when volume decreases from the previous day. On these quieter days, Dysart theorized, institutional investors and informed traders execute their strategies without attracting attention from the crowd. The calculation is simple yet profound: when volume drops and price rises, NVI increases by the percentage gain; when volume drops and price falls, NVI decreases. On high-volume days, NVI remains unchanged, effectively filtering out the noise of emotional, crowd-driven trading.

Norman Fosback's groundbreaking research in "Stock Market Logic" (1976) transformed NVI from an interesting concept into a powerful predictive tool. His analysis of market data from 1941-1975 revealed astonishing probabilities: when NVI rises above its 255-day moving average, there's a 96% chance of a bull market; when below, there's a 53% chance of a bear market. Initially, Dysart himself favored the Positive Volume Index, but by 1967 he acknowledged that NVI had "proved to be the most valuable of all the breadth indexes," calling it AMOMET (A Measure Of Major Economic Trend). This indicator excels at identifying primary market trends by focusing on the accumulation and distribution patterns of sophisticated investors who avoid the spotlight of high-volume days.

Interpretation & Trading Signals

Example Usage

Code examples will be available once the Rust implementation is complete.