I took a little time off discussing the Price/Volume Diffusion Index, as it remained stuck around 54 for some time and only just begun moving again in one direction or another. The diffusion index is extending the decline that has been generally in place since peaking, short-term, in early January this year.
The Price/Volume Diffusion Index- shown below- is presently at 52.9, off from the 74.2 in January and continuing the downward trend.
Diffusion Index
Since January, the diffusion index has shown a series of lower highs and lower lows, as the volume characteristics on the upside has weakened in conjunction with higher volume levels on downside moves.To me, this suggests a weakening in demand as the market prices advance.
That said, the rolling summation index, the raw compilation of data that feed their way into the diffusion index summed over time, continues to track higher.This is shown below.
Summation Index
The upward track tells me that the upside momentum in stock prices remains intact. However, I am mindful that the duration of peak-to-trough mini-cycles, if you will, with in the longer upward cycle has been contracting. This suggests to me a rush to buy the dips at a quickening pace and could indicate an aging of the market's advance.
Another way to look at this is via the slope of the summation index, which has gone virtually no where since September 2012. And yes, the slope, calculated as annual slope coefficient and as seen in the below chart, is another way of showing the aging process of the durational aspects of the upward move in the price/volume relationship, I think it succinctly provides a clean picture of the strength of the advance or weakening aspect there of.
Slope
The Price/Volume Diffusion Index- shown below- is presently at 52.9, off from the 74.2 in January and continuing the downward trend.
Diffusion Index
Since January, the diffusion index has shown a series of lower highs and lower lows, as the volume characteristics on the upside has weakened in conjunction with higher volume levels on downside moves.To me, this suggests a weakening in demand as the market prices advance.
That said, the rolling summation index, the raw compilation of data that feed their way into the diffusion index summed over time, continues to track higher.This is shown below.
Summation Index
The upward track tells me that the upside momentum in stock prices remains intact. However, I am mindful that the duration of peak-to-trough mini-cycles, if you will, with in the longer upward cycle has been contracting. This suggests to me a rush to buy the dips at a quickening pace and could indicate an aging of the market's advance.
Another way to look at this is via the slope of the summation index, which has gone virtually no where since September 2012. And yes, the slope, calculated as annual slope coefficient and as seen in the below chart, is another way of showing the aging process of the durational aspects of the upward move in the price/volume relationship, I think it succinctly provides a clean picture of the strength of the advance or weakening aspect there of.
Slope
To tie everything together, I think the advance is equities is maturing or has matured. There appears to be growing downside risks, but with a Price/Volume Diffusion Index still above 50, a higher trending summation index, and other factors (such as the weighted average standardized VIX) it is still too soon to call this market advance over.
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