How would one Interpret -- Ascending Prices on Descending Volumes

Hi,

I would be request Wise mens to share their Knowledge and Experience-------- What happens when Indices Ascend higher levels and Volume Descends visibly on Charts?

'I am on the prowl, take cover....' . -Mr. Bear. It is a clear Bear warning that Bulls have got exhausted and don't have power to tread further. Add few more lenses to keep a strong watch on those stocks or indices with descending volumes and Ascending prices, when it rolls down it just takes a mad rush.

There are similar patterns in many indices now, that has lead to the fall we are witnessing these 2 days in our markets.

Bulls climb by the stairs, while Bears jump out of the window.

While analyzing volumes please remember this that in market's where considerable amount of arbitrage exists, volume statistics can be misleading. Hence, large levels of volumes may thus be due simply to arbitrage trades and not trend direction. Also, on research conducted on volume led activity, there is no concrete evidence on volume being better indicators for trend continuation, pattern formation and breakout's.

Hence though volume acts as a "supporting indicator", one must keep in mind that index and stocks can rise duly in absence of volumes.

For reference refer to Bulkowski (2005) and Blume & Easley (1994)
Tc

I think, trend can continue even with volume divergence (as mentioned by raunak) .. but that might be only for shorter term. Long term trends, sustainable trend needs all 3 pillers of TA suplementing each other - and these piller are Price, Time and Volume.
Any divergence is a warning sign and needs to be further investigated.

Litrature is full of gyan on price analysis.. but unfortunately, there is very limited gyan on other 2 pillers hence people find it difficult to implement it.
If you read the concepts of VSA - volume spread analysis, you get very different insight into high volume /low volume activities.

In my view, high volume is important signal to watch near key levels before tagging them with bullish/bearish. And low volume is acceptable once trend is in place.
Presence of low volume, narrow range etc on key zone is clearly warning sign for me.
And most of the time, trading decision is to WAIT and LET MARKET OPEN FEW MORE CARDS.

Happy Trading.