An excellent post by SemiBizz over at tradertalk:

So when we have a reduced flow of volume, we see inequities in the market, when we see inequities in the market, indicators can get stretched on inequitable data as operators (F’eds) can influence markets under light volume conditions (like buying the futures market overnight or rigging the bond markets) and until STRONG VOLUME comes into the market these conditions persist.  When these conditions persists we see BEARISH UPTHRUSTS in the market, and that brings us back to summertime light volume, extreme indications that need to be filtered for the trading environment and why… per Eminmee – we see “choppy” rallies.
Now the period of light volume summer trading should be ending in the near time frame… which brings me back to AUGUSTS.

FIRST, lt’s reference… THE LAST MONTH OF HIGHEST VOLUME  AUGUST 2011, the last week of highest volume AUGUST 2011.  This is still fresh, we all remember the events associated with the US Downgrade and our shameful Washington melodrama.

Now let’s look at August 2007, at the time it was the ALL TIME MONTHLY HIGHEST VOLUME, and it was the 1370 low ahead of the November 2007 – 1576 ALL TIME high… 206 pts in  just 3 months.
Now let’s look at August 2008,  a very quiet month on unusually light volume and just very sideways, the high for that month at 1313 which was the high of the BEAR MARKET LOW leg to 666.August 2008 was the “CALM BEFORE THE STORM” as what was normally supposed to be a bias UP Election Year into October, turned into the BIGGEST CRASH OF ALL TIME.
So my point pretty simple here looking ahead.  We should see stronger volume come into the market per seasonal trends, but THE ONE EXCEPTION is a month like we had in 2008, when the volume did not come and the market went into “wait and see” mode – sideways on light volume.

If we don’t see MUCH STRONGER VOLUME, and this market goes into indecisive mode, WATCH OUT.  OTHERWISE, expect volume to pick up dramatically, and you don’t have to stick your neck out, because HISTORY is ON YOUR SIDE.  You can wait for TREND CHANGE or CONFIRMATION based on just one indicator as long as we can still trust it and that is VOLUME.

History says if you get it wrong, you are going to be VERY WRONG, and if you get this right you are going to be VERY RIGHT

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