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1989issue C081-7

Constructing a yield-curve volume-breadth composite

This note shows how to convert each maturity’s volume into signed waves, apply unequal curve weights, and tally a daily plus-one, zero, or minus-one scoreboard for volume-confirmation of rate-market price breaks.

  • On-balance volume adds full session volume after a higher close, subtracts it after a lower close, and ignores an unchanged close, even if the running total turns negative.
  • The close-weighted volume-accumulator is assigned to short-horizon volume-price-analysis; on-balance volume with staircase-labeling is assigned to the long-horizon major-wave.
  • Each of eight unequally weighted cash-index and interest-rate-futures entities receives a signal-score of plus one, zero, or minus one, then those scores are summed into a daily financial-volume-index.
  • Weak short-maturity volume signals against strong long-maturity signals are treated as a flattening setup under yield-curve-segmentation.
Entries in this reading3 entries
On-balance volume25 readingsCurrent trackVolume confirmation54 readingsVolume-price analysis129 readings

Compare a running volume series with price

The archive workflow treats volume-trend turns as preceding price-trend turns. A running volume series is therefore compared with price for confirmation or non-confirmation of new highs and lows.

Volume-price-analysis reads those price extremes against the volume-derived series. A new high or a new low is accepted only when the volume series agrees.

Build the signed volume series

On-balance volume is a cumulative total that adds session volume after a higher close, subtracts it after a lower close, and ignores volume when the close is unchanged. The running total may be negative.

A volume-accumulator assigns a signed fraction of session volume from where the close sits in that session’s high-low range. One documented implementation starts that series at 10000. The close-weighted accumulator is assigned to short-horizon volume-price work. On-balance volume with staircase-labeling is assigned to longer-horizon work.

Label peaks, troughs, and a major-wave

Direction changes on the volume series are labeled as peaks and troughs. Staircase-labeling marks those successive peaks and troughs so a higher or lower sequence becomes the trend assignment. Four consecutive labels trending the same way assign a major trend. Mixed waves produce no signal.

A long-horizon volume signal is specified as a two-step sequence in each direction. It remains in force until an opposite major-wave appears.

Granville vs Chakin volume rules on T-bond futures

Net T-bond points from three ways of trading volume waves on the Chicago Board of Trade front-month contract, September 1977 through spring 1983. Granville’s major-wave-only staircase is the +42 result the article calls the best long-term outcome; Chakin’s accumulator leads on short-term and combined rules. Values are read from the source results table.
Net T-bond points from three ways of trading volume waves on the Chicago Board of Trade front-month contract, September 1977 through spring 1983. Granville’s major-wave-only staircase is the +42 result the article calls the best long-term outcome; Chakin’s accumulator leads on short-term and combined rules. Values are read from the source results table.CBT front-month Treasury bond futures · September 1977 to spring 1983 · 1977-09-01T00:00:00.000Z to 1983-12-31T00:00:00.000Z

The sample spans both a bear and a bull market in bonds. A buy-and-hold stance lost more than 26 points over the same window.

Weight eight entities into a financial-volume-index

The breadth composite records on-balance volume on eight cash-index and interest-rate-futures entities. It averages the front two futures contracts and then applies unequal weights along the curve.

Stated weights are one-half on a utility cash index, full weight on a twenty-bond cash index, double weight on long-bond and ten-year note futures, and full weight on bill, eurodollar, municipal, and five-year note futures.

Tally a daily signal-score and read the curve

Each entity is scored plus one for a bullish short-horizon or long-horizon volume signal, minus one for a bearish signal, and zero when it sits between signals. Those signal-score values are tallied daily into a chartable composite.

Divergent volume signals across maturities are read as yield-curve information. Weak short-maturity signals against strong long-maturity signals are treated as a flattening setup. Yield-curve-segmentation keeps short-maturity, intermediate-maturity, and long-maturity volume signals separate so that split can be read as curve shape.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
4 of 40 in the Volume confirmation track
19891-2 pp.Next on Volume confirmationA bond-futures case study in support, volume, and confirmationSupport is treated as demand and resistance as supply, so a retracement after a multi-month advance is expected to meet prior selling prices and later find buying that absorbs that supply.
All readings on this track · 40 readings
  1. 1988Constructing volume-confirmation overlays on OHLC spreadsheet charts
  2. 1989Commodity advance-decline from delivery months
  3. 1989The most-active list as a three-layer breadth lab
  4. 1989Constructing a yield-curve volume-breadth composite
  5. 1989A bond-futures case study in support, volume, and confirmation
  6. 1989Volume-scaled price boxes and volume cycles
  7. 1990Futures-signed on-balance volume construction
  8. 1990Self-relative volume boxes for news-free breakouts
  9. 1990Broadening swings, demand tests, and volume filters
  10. 1991A same-session pressure test of breadth and volume share
  11. 1991Tick extremes that confirm double tops and bottoms
  12. 1991Constructing auction fuel from volume and open interest
  13. 1994Constructing On-balance volume with smoothing and timeframe confirmation
  14. 1996A volume-gated moving-average trend combination
  15. 1996Constructing four-state range-volume bars
  16. 1997Failed trade review of a descending-triangle breakdown
  17. 1997Construct a head-and-shoulders before the neckline break
  18. 2004Volume confirmation is not optional for a head-and-shoulders reversal
  19. 2007Constructing a three-factor volume-price confirmation filter
  20. 2007Constructing a three-condition moving-average entry with a volume filter
  21. 2008Breakout rules that wait for volume and liquidity
  22. 2011Screen futures liquidity with open interest and volume
  23. 2011Filter executable futures with liquidity and open interest
  24. 2012Rank listed futures by liquidity before a forecast chooses the name
  25. 2012Filter futures liquidity using open interest and volume
  26. 2013Pre-trade futures liquidity as an execution filter
  27. 2014A futures liquidity screen from range, open interest and volume
  28. 2014Evaluating futures contract liquidity before execution
  29. 2014Constructing defended price lines from volume clusters
  30. 2014Filter futures by equal-dollar size, open interest, and volume
  31. 2015Filter futures ideas by ranked contract liquidity
  32. 2017Screen listed futures for execution liquidity first
  33. 2017Filter futures orders by liquidity, open interest, and volume
  34. 2018Using open interest and volume to rank futures liquidity
  35. 2018Score listed futures as an execution menu before the setup
  36. 2019Filtering futures orders with liquidity, open interest and volume
  37. 2019Futures liquidity as an execution filter
  38. 2020A futures liquidity board as a pre-trade execution filter
  39. 2020Sequenced volume and golden-cross breakout rules
  40. 2020Use a listed-futures liquidity filter before execution
By fieldMarket breadth101 readingsBy year198983 readings
All 54 readings tagged Volume confirmation
Also on Volume confirmation5 readings
1988Constructing volume-confirmation overlays on OHLC spreadsheet chartsOn-balance volume1990Futures-signed on-balance volume constructionOn-balance volume2007Constructing a three-factor volume-price confirmation filterOn-balance volume1994Constructing On-balance volume with smoothing and timeframe confirmationOn-balance volume1990Constructing a signed-range negative volume lineOn-balance volume