VOLUME AND OPEN INTEREST SHOULD INCREASE AS PRICES MOVE IN THE DlRECTlON OF THE

MAJOR PRICE MOVE According to this rule, the most bullish condition is price moving up on
increasing volume and increasing open interest; the longs are in control and the price uptrend is
expected to continue. On a daily basis, this rule implies that on price-up days (when quotes close
higher than the previous trading session), volurne should expand and open interest should increase.
In a strong bear market when quotes close lower, volume will expand and open interest will
increase. This ideal healthy price down trend does not often occur in those markets that the public
prefers to trade from the long side. These include traditional agricultural commodity futures and
metals. Conversely, markets such as interest rate futures (V.S. Treasury bonds in particular) often do
exhibit the ideal bear market characteristics of volume and open interest up on pricedown days. The
most bullish and most bearish technical situations are shown schematically in Figures 4-1 and 4-2.

WHICH IS MORE IMPORTANT, VOLUME OR OPEN INTEREST? While the generalization for a healthy
price trend states that volume and open interest should increase in the direction of the major price
move, what if the two variables are in conflict? Which is more important, volume or open interest?
Both