The Cumulative MoneyStream (CMS) was developed by award-winning technician Don Worden and is the exclusive intellectual property of Worden Brothers, Inc. The MoneyStream grew out of joint venture with a large regional brokerage firm to develop a price/volume indicator. The result is an indicator with much the same objectives as OBV. CMS is interpreted in the same way you would interpret OBV. Generally, you look for divergences.
Important divergences can be seen at a glance, owing to our use of automatic linear regression lines in both the price and indicator profiles. The chart is setup so that you can make direct comparisons between the slopes of the price regression lines and the indicator regression lines. (However, do not neglect to look closely for movements not necessarily reflected in the regression line, which is meant as a help, not a crutch.) If the CMS regression lines are sloping upward at greater angles than those of the price, the message is bullish. And vice versa.
The main difference between OBV and CMS is that CMS has a greater ability to contradict price movement than OBV does. This is achieved by using all of the elements within the daily price bar rather than just the close. The high, low, close and daily range are related to volume in a unique and proprietary way. You may wish to compare CMS and OBV in a variety of stocks and time frames. Generally you will find that CMS has the greater predictive power. But not always. Sometimes OBV does the better job. The more things you look at, and the more time frames you habitually check out, the better you are going to do.
The MoneyStream was developed after years of experience with price-volume indicators. In addition to Joe Granville's OBV, ideas by David Bostian and Mar Chaikin were influential in the formulation. The final result embodies a method of filtering out what is believed to be a logical error in the preceding indicators. CMS is not as volatile as Bostian's and Chaikin's creations and it has more power to contradict than OBV.
CMS works very well in conjunction with BOP. CMS and BOP are based on entirely different concepts and sometimes they disagree completely. The idea is to wait for mutual confirmation. Together they are potent medicine. CMS lends itself better to precise timing than BOP. This is because CMS is affected considerably by the price trend itself. BOP, on the other hand, is incomparable at ferreting out hidden patterns of accumulation or distribution.
y is the period of an optional simple moving average which can be applied to the raw MoneyStream.
z is the offset. An offset of 1 returns the value from the previous bar instead of the current bar.
MoneyStream is a registered trademark of Worden Brothers, Inc. Read more about its development in an article by its creator, Don Worden.