For the past couple of days I have been playing with an indicator that, in my own mind, I have called “thrust”. I don’t know whether anyone else uses this, but I expect so — it is an obvious thing to do. It looks at the market minute-by-minute through the day (this is the most granular time-based information I can get) and, in particular, at the volume on each minute. For an up-minute, it adds on the volume, and for a down-minute, it subtracts the volume, so one gets a cumulative up – cumulative down volume line.
I also considered multiplying the volume by the range of the bar before adding or subtracting, so that bigger moves are more significant. But 1) it gave roughly the same picture and 2) I didn’t like the double-counting element — other indicators, including the price chart itself, include the speed of the price action; this one doesn’t — it’s just about whether volume is associated with up or down moves.
A bit of playing with this indicator shows that it might be useful (although I will have to see — it is not very easy to back-test). On some recent pullbacks, the market has seemed to run up on high volume, but the thrust indicator is still flat or down — which suggests the main market trend is still down. Good breakouts seem to have strong thrust in the same direction, which distinguishes them from pullbacks. In last week’s gold trade, the pullbacks seemed to be on low volume, but the thrust was surprisingly strongly downward, indicating that the breakout was likely to be reversed — which is has been. Today’s short EUR/USD trade was partly based on the weak thrust of its pullback to the breakout level.
Update: Here are some charts. The top chart shows that the day before yesterday EURUSD dropped from 1.24 to 1.22 on unusually high volume at the end of the day. The following day it retraced the move, with above-average volume. The second and third charts show that there was a lot more thrust to the down-move than the up-move. This ties in with my intuition that the prevailing market direction remained downwards through both days. It remains to be seen whether this indicator is actually useful, of course, but the intuitive fit is the reason I like it.