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1988issue C041-5

Signing volume by open interest change

A price-signed volume cumulative adds session volume on advancing days and subtracts it on declining days. An alternative signs the same volume by whether open interest is higher or lower than it was a chosen number of sessions earlier, then reads confirmation and divergence against price.

  • A price-signed volume cumulative is a running sum that adds volume on advancing days and subtracts it on declining days. It is used to separate trending from non-trending markets and to flag possible reversals when the line diverges from the price trend.
  • The alternative cumulative is built from volume and open interest alone. Session volume is added when open interest is above its value a chosen number of sessions earlier, subtracted when open interest is lower, and the running total is that day’s reading.
  • Confirmation and divergence are read the same way as on a price-signed study: in-step trends, an unconfirmed price spike, a selloff the cumulative leads, and a new high in the cumulative that price does not match.
  • When the signing rule makes the line rise as prices fall, the plot is inverted for visual comparison. Large seasonal swings in open interest are said to weaken the construction unless those figures are adjusted first.
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Current trackOn-balance volume88 readingsOpen interest analysis130 readingsVolume-price analysis207 readings

Two jobs of a price-signed volume cumulative

A price-signed volume cumulative is described as a running sum of volume that is added on advancing days and subtracted on declining days.

That conventional series is given two jobs: filtering trending from non-trending markets, and flagging possible reversals when it diverges from the price trend.

Sign volume with open interest, not the close

An alternative cumulative is defined from volume and open interest alone, on the premise that a vertical price bar is a function of participant activity measured by those two series.

Construction adds the day’s volume when open interest exceeds its value a chosen number of sessions earlier, subtracts the day’s volume when open interest is lower, and takes the running total as that day’s reading.

The open-interest comparison window is treated as an adjustable parameter. A four-session setting is used in the illustrations, and other lengths are treated as open experiments.

Keep the same confirmation and divergence habits

Worked overlays are used to show in-step trends, an abrupt price spike the cumulative does not follow, a selloff the cumulative leads, and a case where the cumulative makes a new high while price does not.

A later unconfirmed advance after a confirmed decline is read as a bearish non-confirmation. A rising cumulative against a still-falling price is given four competing readings: noise, a shift out of trend, accumulation, or reversal.

Further overlays are presented as showing buildup of positions near lows and reduction near highs, often before the price turn.

Invert the plot in a declining market

Because the same rules make the cumulative rise during price declines in a falling market, the chart is inverted so the line can still be compared visually with price.

Adjust seasonal open interest before signing volume

Large seasonal swings in open interest are said to weaken the construction unless those figures are adjusted first. Currency and financial contracts are named as cleaner applications.

Reading is described as a visual treatment of open interest and volume analogous to a price-signed volume line.

COMEX December 1983 gold, daily

December 1983 COMEX gold breaks from the high-470s to the mid-370s and only retraces into the low-420s, so the close sits well below the old high. Use that lower peak when testing whether an open-interest-signed volume line confirms or diverges. The path was read from the printed price scale; the final session is the sheet high 426.0, low 419.2, close 422.2 dollars an ounce.
December 1983 COMEX gold breaks from the high-470s to the mid-370s and only retraces into the low-420s, so the close sits well below the old high. Use that lower peak when testing whether an open-interest-signed volume line confirms or diverges. The path was read from the printed price scale; the final session is the sheet high 426.0, low 419.2, close 422.2 dollars an ounce.COMEX Gold Dec 1983 · daily · 1983-01-01T00:00:00.000Z to 1983-12-31T00:00:00.000Z

The source also draws a smoother OAH overlay on this same price axis. That overlay is omitted because it is not dimensioned in cumulative volume; only gold can be recovered in native units. Purifoy signs volume with an open-interest lookback of c=4.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
5 of 61 in the On-balance volume track
19881-9 pp.Next on On-balance volumeCase study: weekly on-balance volume with trendlines and a 21-period averageOn-balance volume starts from an arbitrary volume figure, adds the period's volume when price rises, subtracts it when price falls, and can be plotted beside price after about 20 to 30 points.
All readings on this track · 61 readings
  1. 1988Cumulative volume trend and 200-session polarity
  2. 1988Three clocks when cumulative volume led price
  3. 1988Payoff index checkpoints for open interest and divergence
  4. 1988Relative strength, stochastics, and on-balance volume as a turning-point stack
  5. 1988Signing volume by open interest change
  6. 1988Case study: weekly on-balance volume with trendlines and a 21-period average
  7. 1988Combining weekly and daily MACD divergences with on-balance volume
  8. 1988Restoring the original tests for market breadth, on-balance volume, and trendlines
  9. 1989Evaluating volume-weighted breadth extremes
  10. 1989Demand oscillator construction with a momentum overlay
  11. 1989Constructing a volume percentage ratio from advance-decline flow
  12. 1990Constructing net positive volume as On-balance volume
  13. 1990Buying-share scale with on-balance volume
  14. 1990Friday-filtered on-balance confirmation lines
  15. 1991Constructing rate-market volume breadth from on-balance volume
  16. 1991Building a breadth composite from on-balance volume breakouts
  17. 1992Constructing a rate-complex volume-breadth index
  18. 1992Constructing a breadth index from on-balance volume
  19. 1992Constructing signed market thrust from issue volume
  20. 1992Constructing indicator phase across averages, volume and bands
  21. 1993Force on-balance volume to agree with itself at slower horizons
  22. 1993Three transforms of market thrust from breadth and volume
  23. 1994Constructing a tick-line momentum oscillator
  24. 1994Constructing a smoothed on-balance tick momentum oscillator
  25. 1994Histogram confirmation and a second-series veto for MACD-family alerts
  26. 1994Constructing a 40-period envelope on on-balance volume
  27. 1996Constructing a matched percent-B volume disparity
  28. 1997Constructing calendar regime overlays and volume-weighted rules
  29. 1997Constructing market thrust from breadth and volume
  30. 1997Constructing on-balance volume as a signed running total
  31. 1997A three-layer construction for a signed volume-force oscillator
  32. 1997Constructing a range-sum volume-force oscillator
  33. 1999On-balance volume confirmation, price-indicator divergence, and bounded exits
  34. 2000A daily long-only confirmation stack on the tether line
  35. 2000A three-filter tether and volume trend system
  36. 2003Constructing finite volume elements as a finite-period money-flow filter
  37. 2003Constructing on-balance volume from signed session volume
  38. 2003On-balance volume as a market-breadth participation ledger
  39. 2003Construct a volatility-adjusted on-balance volume filter before confirming a breakout
  40. 2004Opening and midday ranges as an on-balance-volume breakout case
  41. 2004Constructing a volatility-gated volume-flow measure
  42. 2004Constructing a volume-flow series from on-balance volume
  43. 2004Volume-flow indicator construction from on-balance volume
  44. 2004Volume-flow slope divergence, then separate on-balance-volume and crossover rules
  45. 2004Volume flow and band construction as one inspectable problem
  46. 2004Auditing advance-decline confirmation for scale, horizon, and composition
  47. 2005Bounded market breadth from the Arms index to BRIN
  48. 2006Overnight-hold entry and exit construction
  49. 2007Evaluating Volume-price confirmation versus On-balance volume and MACD
  50. 2009Volume confirmation versus a price advance
  51. 2010Typeahead retrieval of a moving average, on-balance volume, and a stochastic oscillator
  52. 2010Modified volume-price trend and log-price scale alignment
  53. 2010Constructing liquidity accelerometers from advance-decline averages
  54. 2012Failed short cycles as breadth and volume tests
  55. 2016Earnings straddles, implied volatility, and money-flow filters
  56. 2017A volume residual filter and a price projection matrix
  57. 2019Volume-volatility parabola and signed-volume momentum
  58. 2019Separating on-balance volume into breadth and volume
  59. 2020Constructing the obvm signal line
  60. 2020Constructing smoothed on-balance volume with a signal line
  61. 2020Keep neutrality as a first-class input in three-state market data
By fieldMarket breadth135 readingsBy year1988116 readings
All 88 readings tagged On-balance volume
Also on On-balance volume5 readings
1988Payoff index checkpoints for open interest and divergence1988Constructing volume-confirmation overlays on OHLC spreadsheet charts1988Cumulative volume trend and 200-session polarity1988Three clocks when cumulative volume led price1989Constructing a volume percentage ratio from advance-decline flow