Volume Moving Averages (VMA): Every trader is familiar with
moving averages of security prices, perhaps the most frequently used
technical indicator. We simply apply the concept to volume, rather than
to price, and plot Volume Moving Averages (VMA) ranging in duration from
a few minutes to as long as several months.
VMA surges: In our market studies, we are particularly
interested in the appearance of large peaks (“surges”) in the VMA -
known as VMA surges – and how an index reacts when they are generated.
VMA surges are indicative of sudden bursts of significant buying or
selling activity.
Selling VMA Surge: The event of a Volume Surge as the index
is moving higher.
Buying VMA surge: The event of a Volume Surge as the index is
moving down.
In the absence of distinct volume surges, we still call any volume
that is generated as the index moves higher Selling Volume, and as it
moves lower, Buying Volume.
Our research shows that index values will always react to VMA
Surges (sometimes immediately and sometimes with a delay), and the
greater the magnitude of a surge (or series of surges), the more
pronounced the ensuing reaction.
Chart 1: VMA Surge Example
On the chart above, note the
