The Negative Volume Index (NVI) is used in technical analysis to gauge the significance of volume trends in relation to price movements. It helps traders and analysts understand the impact of volume on market trends and identify potential reversals or confirm existing trends.

The NVI focuses on the relationship between volume and price changes. It assumes that during periods of low volume, smart money or informed investors tend to dominate the market. In such cases, a rising NVI indicates that these smart money participants are accumulating shares despite low trading volume, suggesting underlying bullish sentiment.

Conversely, during periods of high volume, the NVI assumes that uninformed or emotional investors are actively participating. In this scenario, a declining NVI suggests that the market is being driven by uninformed selling pressure, indicating a potential bearish trend.

By analyzing the NVI, traders can gain insights into the strength or weakness of a trend, as well as potential trend reversals. It helps them make more informed trading decisions by considering the interplay between volume and price movements.

However, it is important to note that the NVI is just one tool in technical analysis and should be used in conjunction with other indicators and analysis methods for a comprehensive understanding of the market.