Enough with the S&P 500; let’s look at a globally followed market, the British pound. Figure 7.9 reflects a simple strategy of exiting 20 days after a volume/price pattern. To test these patterns no stop was used, so the worst possible thing could happen in the trade: it could go straight down forever. The price-to-volume setup was to look at the direction of the moving average of price and compare that to the moving average direction of volume. In all instances the moving averages of price and volume were the same; for example, a 60-day moving average of price was compared to a 60-day moving average of volume.

FIGURE 7.8 S&P 500—Long-Term and Short-Term Price Down, Short-Term Volume Down