What Is the Cumulative Volume Index (CVI)?

The cumulative volume index, or CVI, is a momentum ind💃icator that gauges the movement of funds into and out of the entire stock market by computing the dif൩ference between advancing and declining stocks as a running total.

Understanding the Cumulative Volume Index (CVI)

The cumulative volume index is a 澳洲幸运5开奖号码历史查询:breadth indicator that shows the direction of a market or index, such as the New York Stock Exchange or S&P 500 index. While its name makes it sound similar to the 澳洲幸运5开奖号码历史查询:On-Balance-Volume indicator, the difference is that CVI only looks at the number of securities rather than looking at their volume, similar to the 澳洲幸运5开奖号码历史查询:Advance/Decline Index.

When reading the CVI, it's important to note that the actual number doesn't matter since it's not normalized (it's just a running total). Traders and investors should instead look at the CVI's trend over time relative to the index's p🐻rice to int♔erpret its meaning.

Many traders and investors also use CVI in conjunction with other forms of 澳洲幸运5开奖号码历史查询:technical analysis, such as chart patterns or technical indicators, rather than using it as a standalone indicator. By doing so, they increase the odds of a successful trade by looking for confirmation of trends and 澳洲幸运5开奖号码历史查询:reversals.

How to Calculate the CVI

T꧟he cumulative volume index can be calculꦍated as follows:

$\begin{aligned} &\text{CVI} = \text{PPCVI} + (\text{Advancing Stocks} - \text{Declining Stocks})\\ &\textbf{where:}\\ &\text{PPCVI} = \text{Prior Period's CVI} \\ &\text{Advancing Stocks} = \text{Number of advancing stocks in} \\ &\text{current period} \\ &\text{Declining Stocks} = \text{Number of declining stocks in} \\ &\text{current period} \\ \end{aligned}$​CVI=PPCVI+(Advancing Stocks−Declining Stocks)where:PPCVI=Prior Period’s CVIAdvancing Stocks=Number of advancing stocks incurrent periodDeclining Stocks=Number of declining stocks incurrent period​

Using the CVI

The cumulative volume index is used to determine whether capital is moving in 🀅or out of an index. If the CVI is trending lower, traders might assume that a trend is losing momentum and a reversal could be around the corner. If the CVI is trending higher, traders might assume that a trend is gaining momentum and it might be time to trade alongside the trend.

At the same time, traders may also look for 澳洲幸运5开奖号码历史查询:divergences or 澳洲幸运5开奖号码历史查询:convergences between the price and CVI trend lines. Highs and lows made in the price that aren't reflected in the CVI readings may be a sign of a weakening trend and upcoming 澳洲幸运5开奖号码历史查询:correction. 

Example of CVI

The following chart shows an example of a cumulative volume index applied to the SPDR S&P 500 ETF (🌺NYSE ARCA: SPY) from March 2020 to March 2021.

In the chart above, you can see that the CVI (dꦜepicted by the blue line in the lower panel) decreases in🃏to April 2020, but then steadily increases.

The Bottom Line

The CVI can provide insight to traders about the broader market by relaying the momentum that is occurring, which shows the difference between advan🌌cing and declining stocks. Traders should focus on analyzing the trend rather than the actu👍al number to understand where the market is moving.