In the modern market environment (roughly the past decade) we have consistently seen volume spikes during sell-offs followed by volume trickling lower during steady uptrends. The recent price/volume action in the S&P 500 (SPY) is a perfect example of this phenomenon:

SPY_Weekly_12.3.2014

 

This recent trend is a marked shift from the days of Edwards & Magee when they wrote:

"Volume goes with the trend....thus in a Bull Market, volume increases when prices rise and dwindles as prices decline...."

Those words were written in the 1940s when the market was a very different place. Advances in technology and the impact of that on the news cycle have had a dramatic impact on how investors participate in markets. In the 1940s and 50s there was growing participation among investors as the US economy boomed and Americans began investing in the stock market for the first time. Growing participation and a nascent stock bull market meant volume increased in the direction of the broad uptrend.

Since the dot-com bust (2000-2002) and the Global Financial Crisis (2007-2009) we have seen waning investor participation in the stock market despite the massive bull move of the last 5 years. This means that the vast majority of market trading volume is attributable to large institutions and a growing percentage of stock market wealth is being held by a smaller minority of ultra-wealthy investors.

Ownership_of_Stocks

This year, for the first time in more than a decade Americans reported an uptick in stock market participation

In recent years volume has generally only spiked dramatically during larger declines which have served to trigger a fear driven response from investors. Then, when panic has subsided and the uptrend has resumed we have typically seen volume slowly trickle off as price continues to move higher.
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