The Upside-Downside Volume Line is a market breadth indicator and should be
compared to the other market indices like the Dow Jones or S&P 500. Daily or weekly
NYSE data is used in the calculation. Because the Upside-Downside Volume Line reflects
the action of the general market, any divergences are watched closely by market
technicians. As long as the Dow and the Upside-Downside Volume Line are moving in the
same direction the trend will continue. If the Dow makes a new high which is not confirmed
by a high of the Upside-Downside Volume Line, caution is warranted. It is more affirmative
than the Advance-Decline Line and it gave a perfect sell signal in January 2000, when the
Dow made a new high and the Upside-Downside Volume Line lagged behind (charts
below). Vice versa, if the Dow makes a new low and the Upside-Downside Volume Line
doesn't, you should cover your short sales. To calculate your own weekly Upside-Downside
Volume Line is very simple and you can begin your calculations at any time. Just pick a
large enough base number like 1000000. Then you calculate each week (or day) the
difference between the upside volume and downside volume by adding the volume of
advancing issues and subtracting the volume of declining issues. If you have an upside
volume of 673210 and a downside volume of 732827 on your first week, the reading of your
newly created weekly Upside-Downside Volume Line would be 940383 (example below).
