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Why Extremely Lopsided Volume Days Are Bullish at Trader’s Narrative

This is a guest post by Wayne Whaley, CTA:

I first learned about the importance of extreme one day up vs. down volume in the mid 1980’s, while studying Martin Zwieg’s book “Winning On Wall Street“. In his book, Dr. Zweig suggested that any day when up volume leads down volume by a 9 to 1 margin is a sign of positive momentum for equities. He later points out that having two such occurrences in a short period of time is very bullish.

On Friday March 5th, using my unsanitized NYSE data, we experienced a 13 to 1 “Up to Down Volume Day”. We had also experienced a 10 to 1 day on February 16th. I scanned my database back to 1970 for all occasions where two such days had occurred within 21 (approximately one month) trading days of each other. All days where there were more than two such days were considered repeats. Also in my version, to squeeze out the really juicy returns, there could not be a nine to one “down” day in the last 21 trading days. I found nine instances.

“Back-to-back” 9:1 Up to Down Volume Day Signals:

back to back 9 to 1 up down days data table

*Volume Index=Up Volume/(Up Volume + Down Volume)
Also, note that there were no 9:1 down days over this period.

I was a bit surprised by what popped up on the screen. Every data point returned at least double digit returns over the next 252 trading days, with the exception of the January 1987 instance. But as you may recall, the market was up sharply 9 months later before succumbing to double digit bond yields and crashing in October. Unfortunately, adding the caveat that there could be no nine to one down days in the last 21 days, eliminated many good signals such as the spring of 2009, but this was required to keep the 252 day record perfect.

In his book, Zweig credits Lowry Research with doing the initial research on the importance of the one day up vs. down volume. If you read Lowry’s most recent update, much of their work focuses on the importance of getting a 9:1 up day that reverses a 9:1 down day.

Interestingly enough, we just got a little bit of the best of both Zweig’s and Lowry’s approach. The two 9 to 1 up days that we experienced this month were preceded by a 9 to 1 down day 21 trading days ago on February 4th. If you screen for occasions of 9:1 up days that were preceded by 1 single 9:1 up day and 1 single 9:1 down day in the last 21 trading days you get the following six data points:

Two 9:1 Up Days plus “One” 9:1 Down Day in the last 21 Days:

two 9 to 1 up plus one 9 to 1 down day datatable

One should keep in mind that I did not consider instances with more than two 9:1 up days as they were considered repeats and I found that the existence of 4 or more tends to suggest the market is overextended. Now, here are the results if we combine the two studies:

combining both volume studies March 2010

To be honest, if this study were authored by someone else, I would be a bit skeptical and wonder about the bullish curve fitting going on with the various constraints. So I’m going to grant you your skepticism, but regardless, given that Zweig and Lowry have similar analysis in their back pockets, I’m not inclined to want to go short the market on an intermediate basis.

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21 Responses to “Why Extremely Lopsided Volume Days Are Bullish”  

  1. 1 Babak

    Thanks for another great contribution Wayne. It reminds me of this similar study from back in 2006: Running with the Bulls.

    It is ancient history now but there was a lot of pessimism out there that summer. I remember distinctly reading a lot of doom and gloom from bloggers especially.

  2. 2 jesuscheung

    great work!

  3. 3 Daniel

    Agreed with jesuscheung, really interesting analysis. How is up volume distinguished from down volume exactly on trading charts?

  4. 4 Jimmy

    Thanks for the research Wayne! I am aware of the extreme up/down volume but I was wondering if there is any similarity for the Nasdaq extreme up/down volume?

  5. 5 jezza

    Babak, nice one, Zweig is a genius, he reminds me a little of Jim Slater in the UK, I suppoise you would say 9-1 volume up days for individual stocks would also be very bullish.

    Are there any particular points to note in volume analysis of individual stocks, aside from following the obvious volume trend direction?

  6. 6 spencerfrater1

    Give me just one guest post from Wayne in preference to a free subscription to EWI - nice one mate!

  7. 7 Wayne Whaley

    thx for reviewing my work.

    I would assume that similar analysis has been done on individual stocks. I would be interested to see the results as well, but given that one institutional buyer can come in and dominate trading on an individual issue on a particular day, I would be surprised if the same characteristics held for individual stocks as it does for an index of stocks

    I am aware that many research institutions have now comprised their own indexes that they do their tape analysis on. I know that Ned Davis Research has an index that includes issues of both the NYSE and the Nasdaq. I suspect this is a product of many analyst missing the boat in the 90’s as the tech sector pulled the NYSE higher. I’ll put it on my todo list. If someone wants to shoot me a nasdaq file of up/down volume, Ill try to put it through the paces when I can.

    I’m not sure how a chart of up vs down volume would benefit us for this particular indicator, since you are focusing on one day stats. And I don’t know if this information is of much utility as a trading tool. I believe that most view it as an intermediate indicator. Up/Down statistics are listed in most daily financial papers with the WSJ and Barrons usually serving as the home for the official numbers.

  8. 8 Alex

    Hi Wayne, thanks for your post. I have a question: which kind of software did U use to extrapolate the data patterns ?

  9. 9 Wayne W

    I am an engineer by training, and I write my own software in FORTRAN, the engineering software of the 70-80’s. It’s hard to teach on old dog new trick, but it does give me a lot of flexiblity to attack the problem from whatever angle I choose.

    I’m not sure if your comment is a compliment of my work or a shot at EWI. but in case it is some of the former, I appreciate your comment and I’m glad you a enjoyed the piece. We should probably really wait and pat Wayne on the back when we get to 1250.

    It’s as difficult for me to stay long the market as it is for everyone else, but that is the nature of a bull market (climbing a wall of worry). I may change my mind and go short the market at anytime if the evidence suggest to me ow, but I try to remind myself often of Jesse Livermores’s quote, “A man who can both be right and sit tight is uncommon”.

    On a shortterm basis, I have had no positions in the SPs since COB Monday, but if I were short the market, I would be concerned that most of the foreign markets and commodities were down on Tuesday, yet the SPs were able to buck the trend and climb into positive territory by the afternoon. But shortterm, I’m a spectator for a few days.

  10. 10 Babak

    Spencer, there is no need to tear down one person in order to build up another. I do think this market is rather tenacious and defer to Wayne’s historical analysis (which corroborates not only Lowry’s most recent note but also the other historical study I did earlier on consumer confidence) but in the very short term, I do think the market will have difficulty going higher. I’ll cover this more in depth in a few days but the put call ratio spiked up yesterday - not a really good portent for bulls.

  11. 11 jezza

    Thanks-Wayne, Zweig and Lowry, all in the premier forecasting league in my book.

    I am still confused as to what contribution EWI makes?

  12. 12 biscosc

    Jesse Livermores’s quote, “A man who can both be right and sit tight is uncommon”.

    I guess I don’t need to keep reminding you anymore! :) I know this strategy is very boring for most people but I have a hard time believing these short-term pullbacks can really be gamed consistently. For me, I’m sticking with what’s been working - Tech, Materials, Consumer Discretionary until they stop working, and I’ll let people smarter than me fight the tape.


    Nice work.

  14. 14 Wayne W


    The key words in Livermore’s quote is ‘be right’.

    Unfortunately everyone that I have ever heard of that has been in the market timing business for a couple of decades has been dead wrong at some point. Even Livermore went broke a couple of times before getting his act together and making his fortune by being short the 29 crash.

    His quote could have just as easily been

    “He who is wrong and sticks with his long, often goes home with nothing but a bone”.

    I think some of those words kind of rhyme.

    Livermore was the Moses or Confusius of establishing what are now time honored trading rules, such as cutting losses short and letting profit runs. He makes for interesting reading.

  15. 15 Hans

    Where can I find this information?
    How can I know that a 9 to 1 volume up day happened?

  16. 16 Wayne W


    Up and Down Volume on the NYSE is listed in the financial section of most major newspapers and on their corresponding internet sites, but vary from one source to another. WSJ is final authority and their numbers match those in Barrons on the weekends. I can not figure out where Yahoo gets their numbers they list daily.

    WSJ internet stock market data site

    CNBC site

    I have subscribed to Barrons for 20 years, if for no other reason than the Market Laboratory which is filled with a summary of stock market data on many subjects.

    You might find this article written by Paul Desmond of Lowry’s Report on this subject of interest

    The top notch research institutions (NDR) calculate their own indexes and track tape stats on those.

    If there was some interest, I could generate a list of past 9/1s on the NYSE. I am actually a much bigger fan of the 5 day moving average.

    A great research project would be to explore if there is any utility in tracking 9/1s on foreign indexes. Someone has probably done such somewhere.

  17. 17 Hans

    thanks for your answer.
    My idea was that I would like to receive an email from a website when a 9 to 1 volume upday appears for the NYSE or the S&P500. That would be a direct alert for me.
    I don’t know if something like that exists.

    I subsribed to the Wall Street Journal and there I could find the advancing volume and the declining volume. So when I divide that, then I can find the ratio.

    Tom McClellan wrote an article about 10 to 1 Upsite Volume.

    McClellan was the nr. 1 timer in the Timer Digest ranking in the last 3 months of 2009, and nr.2 timer for the last 6 months of 2009. So looking at volume seems te be very important in predicting future market direction.

  18. 18 Dan

    Hey Wayne, great report!

    Can I request that you do a similar study for 9to1 down days? (i.e the inverse of the above study).

    Are several concurrent large down volume days a leading indicator for a bear market?



  19. 19 Wayne W


    Yesterday was the third nine to one down day that we have experienced in the last two weeks. There have been no nine to one up days during that period. I ran a search yesterday for all cases since 1970 where you had three down days and no up days over a one month period and found four dases which happen to all occur within the last decade. The results after these four were very similar to normal performance and the only thing that I could draw from the observations was that they occurred during periods of tremendous volatility. I was going to post the results, but they simply were not very interesting.

    Although one’s first impulse is to expect what I refer to as reverse thrust day’s to have the opposite impact of forward thrust days, it is normally not the case. I have studied this phenomena fairly indepthly and actually the results indicate that extremely “unified” market moves in either direction, up or down have a positive bias over an intermediate time frame. I’m at home now, and don’t have the study results on me, but seem to recall that the results were 3-1, 3-1 and 2-2 for 3, 6 and 12 mts.

    If you have been following my comments, for the last 6 weeks. I have been a bull looking for a normal 5-10% correction. The correction has actually surprised me in how long it took to develope. I haven’t seen anything yet to make me change my mind in terms of looking for a normal correction. The 1150 area was a previous area of strong resistance on the upside. Those levels tend to become support once eventually broken, lets keep an eye on 1150.

    I have a thrust model that keeps a running sum of thrust, capitulation, negative signs of confusion signals and some trend following stuff. In September of 2009, It had the highest reading ever recorded in the database that I have going back to 1970. This type of momentum can impact the markets direction for some time. We also had one of the most reliable thrust signals that you can get in March of 2010 and that is a 20 day breadth thrust signal, that I posted numbers on.

    This plus the fact that we had the classic characteristics of a capitulation selloff in Oct of 2008, the likes of which normally occur once a decade and not more frequently that once every four years, gives me reason to think the mkt has more upside potential. We had one in 2002 and one in 2008. Since 1970, there have never been three such occurences in any 10 year period.

    Something that I am watching for signs that I need to get up on the other side of the bed is the New Highs and New Lows. If we were to experience 10 or so days, where we have an unusually high preponderance of “both” new highs and new lows, I would have to reconsider my outlook. I have my own version of this stat in the tape model, but something akin to a 10 day period where we average at least 50, or so, of stocks making both new highs and new lows would be concerning to me and would cause my intermediate tape model to flip negative. I should probably give some thought to posting that study. I’ll look into it this week.

    We just completed a four day period of plus, minus, plus, minus one percent days. I thought that it would be interesting to study, but only found a handful cases that were not conclusive either and simply suggested that you were in a very volatile mkt, with possibly a slightly positive bias.

    But guys, I could be wrong, just one guys observation. gotta get to the office, ttul

  20. 20 wayne

    Dan, had a couple of studies I was doing yday confused, here are the actual results,

    We have had three days in the last month of trading where Down Volume led Up Volume by a nine to one margin, April 16, April 27 and May 04.

    Date 3MTSP%6MTSP% 12MTSP%
    700504 -1.66 5.03 30.97
    731212 6.50 -1.31 -27.68
    781020 1.99 3.70 3.73
    800324 15.34 31.35 35.65
    871019 10.89 14.71 22.94
    980831 21.52 28.22 37.90
    070803 5.26 -3.65 -12.91
    071107 -9.78 -5.92 -38.68
    080117 4.28 -5.44 -36.24
    080205 6.11 -3.87 -37.74
    080314 5.58 -2.83 -41.47
    080915 -26.24 -34.76 -11.74
    090702 14.77 24.27 30.79

    10-3 6-7 6-7
    3.89% 3.58% -3.09%

    I can not draw any strong conclusions from the results, especially since three of the occurrences were repeats in the first quarter of 2008, which greatly skewed the 12 mt avg #s

  21. 21 Dan

    Hey Wayne,

    I concur with what you’re saying about reverse thrust days; in fact I recall Marty Zweig saying that 9to1 down days aren’t conclusive the same way upthrust days are.

    Thanks for taking the time to reply and for the depth of your analysis, its much appreciated!


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