Upside/Downside

Measures of Upside/Downside separate the volumes for rising markets from those in falling markets. Since volume is independent of price, it makes a valuable tool for measuring the quality of a price trend.

There are two common measures for Upside/Downside:

  1. The Upside/Downside Ratio, and
  2. Upside/Downside Volume Line Index

The Upside/Downside Ratio

Overview

 

Signals

The higher the U/D ratio, the more bullish the signal: high readings above 4 are considered bullish signals, and low readings below .75 are considered bearish signals.

Martin Zweig wrote in Winning on Wall Street, "Every bull market in history, and many good intermediate advances, have been launched with a buying stampede that included one or more 9-to-1 days" ("9-to-1" refers to a day were the Upside/Downside Ratio is greater than nine). He goes on to say, "the 9-to-1 up day is a most encouraging sign, and having two of them within a reasonably short span is very bullish. I call it a "double 9-to-1" when two such days occur with three months of one another."

Overview

 

Signals