"Hi David, much has been said on news channels about concern about the lack of volume on this recent up move in Equities. From basic analysis it seems like volume has particular relevance in exhaustive large sell offs when accompanied by volume spikes to indicate capitulation. However it seems that in many cases upside moves are more persuasive if volume is running at or below recent average volume. In deed a capitulation by shorts, new entrants by retail investors and profit taking by professional money fortunate enough to have been long could result in the higher volumes so many want but would in fact be quite concerning? Would be really interested to hear your views on this."

David Fuller's view Thanks for your summary and question certain to be of interest to many other subscribers.

I agree with your first part and we look for heavier volume as evidence of capitulation selling in a steep downtrend, and therefore an ending signal. Understandably, this was highest in September and October 2008, as you can see from this chart of the S&P 500 Index, and it spiked again in August 2011.

We also had some fairly heavy volume during churning above the lows from late August to early October 2011, signifying disagreement. I am not perturbed by the relatively light volume during the current rally. Actually, I have found it reassuring because people are clearly no longer dumping stock and high frequency trading may be frustrating institutional efforts to get on board. Heavier volume in the currently persistent uptrend would suggest disagreement which could only occur with an increase in supply.

The times when I do like increased volume are on breakouts from trading ranges. However, in my analysis volume will always be secondary to the price action.