Three clocks when cumulative volume led price

How the three clocks are assigned

This archive walkthrough uses a 1986 and 1987 sequence on the Dow Jones Industrial Average to show how a cumulative-volume line can print highs and lows before price. The line used here is on-balance volume, a running total of volume added on up periods and subtracted on down periods, plotted against the index so a reader can mark breakouts, a higher-low, and a session-lead versus price.

Editorial checklist: read an index turn on three clocks. Cumulative volume is the lead clock. Price is the lagging clock. Transports and the advance-decline index are the confirmation clocks. Volume-price analysis then asks whether the volume structure is holding, breaking, or stretching relative to the same market price structure. Divergence is the split in timing or direction that makes those clocks disagree. Count the session-lead so a breakout stays a falsifiable hypothesis rather than a story.

When the Dow fell back and the volume line held

DJIA cumulative volume printed a new high in September 1986, pulled back to a higher-low that same month, then made a sustained new high in October and another new high in December. On September 11 and 12, 1986 the DJIA fell 121 points back toward its base while cumulative volume stayed well above its own base, then broke to a sustained new high in October.

During the March through September 1986 range, Dow cumulative volume made a new high of 1062 on September 4, a higher-low of 978 on September 12, and a new high of 1070 on October 27, 24 trading sessions before the DJIA high of 1956 on December 2. The comparison is the volume-price-analysis point: price was still falling back toward its base while the volume line held a higher-low and then broke out first.

Transports and the advance-decline index as confirmation

S&P Transports failed to confirm new DJIA highs for months and drifted lower from April to July 1986. That refused confirmation is divergence between the industrial price highs and the transport line. On September 12, 1986 the transports index printed 181.86 near a prior low of 176.16 while its cumulative volume held far above its low and then made a new high in October with DJIA cumulative volume.

The NYSE advance-decline index peaked in April 1986, eased into August, rallied into November, and made a final low on December 31, 1986, then took 21 trading sessions to reach a new high in early February 1987. Editorial use: keep this breadth line as a confirmation clock beside the Dow, not as a substitute for the cumulative-volume lead.

Three session-leads after July 1985

After July 1985, Dow cumulative volume led price at three documented turns, including a volume high of 754 on August 29 versus a price high of 1369 on October 16, 32 trading sessions later.

In spring 1987 the Dow price low of 2216 on May 20 trailed a cumulative-volume low of 1393 on April 27. Price then broke out to 2407 on June 16, 28 sessions after the May 5 cumulative-volume high of 1475. By the May 20, 1987 Dow short-term low, DJIA cumulative volume was already in new-high ground after a May 5 breakout, and S&P Transports cumulative volume printed a confirming new high on May 6.

Price above the cumulative-volume line

After that 1987 advance, Dow price stood well above its cumulative-volume line. The archive write-up framed the gap as needing either more upside volume or a sizable price decline, and noted that cumulative volume was again resisting during the sell-off then under way. Editorial reading: that stretch is volume-price analysis after the lead has already printed, not a new first signal.