Cumulative Volume and momentum
by John C. Lawlor
Price is so obvious that we all expect it to tell us everything. For example, if our stock gains $1 on the
day, we feel good. However, what we really do is multiply that $1 by, say, the 500 shares we own and, of
course, we feel $500 richer. It is truly the number of shares we own that makes us feel good. Volume,
then, makes the difference, not just the price or the price change.
Some technical analysts talk erroneously about price momentum. Momentum is defined as "the force of a
moving body" or "momentum = mass ´ velocity." Consider a Fiat and a Mack truck moving down the
highway at 50 mph. If they strike a stationary object, which will have the greatest effect? Which has the
greater momentum due to its greater mass? Which will generate the greater force? If we think about the
Chicago Bears' Refrigerator Perry hitting the line at full speed, we really understand momentum.
Thinking about market forces then, volume represents the mass of momentum and is causative of price
change. Price is simply a number indicating change alone. Measuring and evaluating volume can reveal
and confirm price changes.
In the first installment of this article (Stocks & Commodities, January 1988), I presented charts where
Cumulative Volume (CV) was overlaid on price to show the moving relationship of both. In addition, the
200-day moving average of price (200DMA) was placed on the chart to show how it normally is a
moving line of resistance or line of support for price. The charts showed only one additional CV
characteristic called a channel trend.