I thought there was an interesting debate around price and volume the other day on this thread that i wasnt too clear about. So looking at it objectively and not specifically debating the points brought up the other day i have found information from Pring's TA Explained.
He quotes William Gordon in his book 'The Stock Market Indicators' as noting between 1877 and 1966 - 'In 84% of the bull markets the volume high did not occur at the price peak but some months before.' Of the 18 bull markets, two uptrends ended with volume and price reaching a peak simultaneosly (Jan 1906 and March-November 1916), and in one uptrend (October 1919) volume lagged by about a month. The lead time of volume in the remaing 15 cycles was from two months (April 1901 & December 1965) to 24 months (January 1951). The average for all cycles was 9 months.
Pring's own research shows that between 1966 & 1983 volume has consistently continued to lead major price breaks.
Quoting from Pring;
'Since volume is a relative concept,i.e., the level of volume is compared to that of a recent period in order to determine its level, it is usually measured on a rate-of-change basis, although some analysts prefer to use MAVS of the actual volume figures.'
He continues regarding a chart which i wont post but you will get the idea and its worth as market bottom info. The chart is DJIA 1953-1978.
'The chart shows the annual rate of price change for the DJIA and an annual rate of change of a 3 month total of volume. In most instances the rate of change of volume led that of price, especially at market bottoms.'
Smoothing the data in another DJIA chart 1943-1978. Technique used is an annual rate of change of a six month total of volume. The resulting index is then smoothed by a 14 month exponential MA. The price index is a 12 month rate of change smoothed by a 12 month weighted average. From this he notes;
'..the volume curve has an almost consistent tendency to to peak out ahead of price during both bull and bear phases..'
He further notes the use of the two indexes for precise timing purposes is best employed at major bottoms.
If one of the more technical minded would like to apply that to a chart, go for gold.
Volt, if you read this could you explain the difference between counting calender days and counting trade days in cycle calcultions, thanks.
(20min delay)