Volume indicators by Arthur A. Merrill, C.M.T.
The activity of the market, its volume, has long been of interest to investors and traders. I have a copy of the first book on stock market technique, ABC of Stock Speculation, written by S. A. Nelson in 1903. In it, he discusses the saying, "A dull market precedes a decline" and the differences in bull and bear markets.
Volume on a rise has always been considered good news; volume on a decline is bad news. It's an indication of the direction of enthusiasm. Is the market enthusiastic on the rises or is it enthusiastic on the declines?
To measure this inclination and check it out, several years ago I developed two indicators, the first of which is Volume Up/Down Days. This is a simple weekly comparison of the volume on the last five rising days to the volume on the last five declining days. To smooth out erratic moves, I use a 33% exponential which is similar to a five-week average. Over the past six years the indicator has averaged 106.5% with a standard deviation of 7.71.