Dominant Price-Volume Relationship

Technician Don Worden uses price-volume relationships to confirm price action. He analyzes all stocks within the Russell 3,000 and breaks them into four groups; Price Up Volume Up (PUVU), Price Up Volume Down (PUVD), Price Down Volume Up (PDVU) and Price Down Volume Down (PDVD). The dominant PV relationship is the one that contains more stocks than any other. For example, consider 1900 stocks were PUVU, 500 were PUVD, 400 were PDVU, and 200 were PDVD. The dominant PV relationship would be PUVU, which is bullish. The dominant PV relationships can mean different things though, depending on whether the market is trending up or down.

PUVU: Price Up Volume Up is bullish regardless of whether the market is trending up or down. In an uptrend it confirms the continuation of a trend. In a downtrend, it signals a possible reversal.

PUVD: Price Up Volume Down is regarded as somewhat bearish. In an uptrend, it means the buyers are losing strength and the trend my reverse soon. In a downtrend, it means the bulls were able to stage an up day, but on weak volume. It usually signals a continuation of the downtrend.

PDVU: Price Down Volume Up means different things depending on recent price action. After an extended uptrend PDVU signals strong selling pressure, and a new downtrend may ensue. After an extended downtrend, PDVU signifies oversold conditions and the market will often reverse course.

PDVD: Price Down Volume Down can be either bullish or bearish like PDVU. In a strong uptrend, PDVD shows decreased selling pressure on the pullback. The market will often continue upward after the consolidation. In the middle of a downtrend PDVD shows complacency between bulls and bears. The downtrend will often continue downward when the dominant PV relationship is PDVD.

Below is a chart of the S&P, with some key PV Relationships called out.

At this point, the dominant PV relationship continues to be PDVD, which is a bearish continuation signal.