What is the primary use of the Positive and Negative Volume Indices?

The Positive and Negative Volume Indices are primarily utilized to track volume changes in correlation with price movements. These indices differentiate between days when volume increases and days when it decreases, providing insights into the strength of price trends based on trading volume.

The Positive Volume Index (PVI) increases on days when the trading volume is higher than the previous day, indicating bullish sentiment and a continuation of upward trends. Conversely, the Negative Volume Index (NVI) rises on days with lower trading volume compared to the previous day, suggesting bearish sentiment and potential reversals in price trends. This relationship makes them particularly valuable for understanding how volume dynamics can influence price behavior, aiding traders in assessing market strength or weakness.

In this context, while market volatility, sentiment, and long-term trends are important aspects of trading analysis, they are not the primary focus of these indices. Instead, the core function is the nuanced relationship between changes in volume and resulting price movements.