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The positive volume index was created by Norman Fosback. It is used, as with the Negative Volume Index, to determine the nature of trending markets.
The positive volume index is a cumulative indicator, its value increases by the daily return of the close price multiplied by the yesterday PVI value, if the volume is higher than the yesterday's volume and it remains the same in case today's volume is lower or equal to the yesterday's volume.
PVI shows the activity of nonprofessional traders in the market. The increase of volume in bearish days is generally explained by the increase of activity of amateur investors who are just following the crowd. In days where the volume is low, these amateurs are not particularly active, while the professional are working and making the true money.
The PVI is also used to generate buy or sell signals by comparing PVI value to its moving average over 255 days. According to Fosback, there is 67% probability of bear market when PVI is under its moving average and only 21% when it is above.
The function, named 'positive_volume_index' calculates PVI value in each bar starting from the assumption that PVI initial value is equal to 1.
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