The Financial Volume Index Expanded For The
by Patrick Cifaldi, C.M.T.
The financial volume index, which was first introduced by Patrick Cifaldi in the pages of STOCKS &
COMMODITIES in 1989, takes on and uses the study of volume, surprisingly underutilized in technical
analysis. The index combines futures contracts, the Dow Jones Utility Index and the Dow 20 Bond Index,
and here, Cifaldi examines its uses for the current decade.
In the study of technical analysis, price data are the information most often used in research. Often
underplayed is the study of volume, either by itself or in tandem with price analysis . Most often, volume
is used to confirm that a price move is being supported by sufficient power to continue the movement. If
volume is not sufficient (usually measured on a relative basis), then a warning that a change in trend is
likely may be signaled. Volume is the gas that runs the engine of the investment. The more volume, the
more gas—or potential for a move.
Of course, volume is not a new study. L.M. Lowry was one of the most famous masters of volume
studies. His most famous and flamboyant of the volume studies masters is Joseph Granville. His
never-ending vigilance in continuing volume research has always been both inspiring and impressive.
I initiated the research that led to the development of the financial volume index (FVI) in summer 1987. I was employed by a regional bank as a government Treasury bill trader at the time, and I was leery of the
equity markets' technical condition. In my own trading account, I had sold all my equities in July that year
and tried shorting the market several times. Nothing seemed to work, as the equities were having an
inverse reaction to a rise in rates. ...