Update on Cumulative VOLUME Breadth - CVB (Preview)

By Lawrence G. McMillan

One of the cumulative breadth indicators that we follow is cumulative VOLUME breadth (CVB).  It is the running daily total of “volume on advancing issues” minus “volume on declining issues.”  While it can be calculated using NYSE, NASDAQ, and “stocks only” data, we prefer the “stocks only” (i.e., all stocks on which listed options are traded in the U.S.).  

As we have pointed out for some time, when CVB makes a new all-time high ahead of $SPX doing so, $SPX will follow.  This has been true in every case since 2000, which is as far back we have the data for this indicator.  Most recently, $SPX suffered a minor pullback in January, dropping from its high of 3870 on January 26th to as low as 3694 on January 29th.  There was one particularly nasty day in that week – January 27th. $SPX was down 100 points that day, but CVB closed at a new all-time high anyway!  Apparently there had been very heavy volume on the few advancing stocks that existed that day.  That was a “prediction” that $SPX would also trade at a new all-time high, which it did on February 4th.  

That is a short-term example, but some of these are much longer-term.  For example, in the summer of 2020, when the market was coming out of the depths of the COVID-related bear market that bottomed in March 2020, CVB moved to a new all-time high on June 5th, 2020, when $SPX was at 3193.  At that time, the all-time high for $SPX was 3393, set on February 19th, 2020.  That was a 200-point gain signaled by the indicator (3193 to 3393) on June 5th, 2020, and it was fulfilled on August 18th...

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