Price/Volume Diffusion Index Fast Approaching Fifty

I am seeing somewhat divergent messages in the weighted average standardized VIX (WASV) data and my Price/Volume Diffusion Index (PVDI). This is, at least, the short-term indicators are concerned. The WASV has been indicating that equities moved into a 'risk-off' phase in the short-term. In contrast, the PVDI remains above the 50 demarcation, suggesting positive future price performance of equities. I present the PVDI and the raw summation of the raw index results feeding into the PVDI below.

Price/Volume Diffusion Index


Summation Index


I reconcile the above mentioned dynamics in that the WASV is warning of near-term risks while the PVDI is suggesting that the mid- to long- term could still be in place. That said, the PVDI has rapidly declined to just above the 50 demarcation. This is occurring with a summation index that appears to have broken the upward trend that has been  in place for months. The breakdown in the summation index could be heralding a protracted decline in the PVDI, noting that selling volume has gained momentum in recent months.

Where does this leave us? I am playing the signals in the following way. For one, the SPY came off recent highs on increased volume late in June. This alone, in my mind, places the outlook for equities in negative stance. That said, I would consider becoming more constructive on equities and risk in general if the WASV moves above the 2 demarcation while the decline in the skew levels off. This would have to occur with a rebound or leveling off in the PVDI, as history suggests a break down below 50 has been associated with future negative market performance. I would remain with a negative stance if the PVDI breaks the 50 demarcation.