Monday, December 23, 2013

Price/Volume Diffusion Index Still Points to Higher Equity Prices

It has been awhile since I updated this publicly and I wanted to provide you a quick update. My Price/volume Diffusion Index (PVDI, which tracks the trend in the intersection of price and volume levels in the S&P 500, continues to point towards higher equity prices. Currently, the PVDI sits at a demarcation just above the 60 level. Typically, PVDI's above 50 have usually been followed by equity prices that are higher some months out.

More so, the summation index or an index of price volume levels that feeds into the PVDI also continues in an uptrend. This index tends to follow equity prices more so than the PVDI but can be used as confirmation for moves in equity prices.

However, the strength in the upward move continues to peter out. This is as the rolling slope of summation index continues to fall off. A fall in the slope of summation index could be an early warning but I would remain with the premise that the PVDI continues to point towards higher prices, as the the index remains elevated and the summation index trend remains positive.

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