Some people simply won't hear what I have to say regarding price/volume analysis and some of the complexities which might be involved.
What I tried to show in the Dow Industrials chart is, I believe, perfectly in keeping with the writings to Tom Williams, the guru of VSA. (And, I might point out, a person who merely embellished on Wyckoff who put more emphasis on price action than volume.)
Here's what Tom Williams says about "How to Recognise a Market Bottom":
Once you have seen very high volume on a down-day (or bar) on your chart, this shows high activity in the market. If a rally starts due to the market-makers buying (or absorbing) the selling from weak holders who are being shaken-out on the lows, the market will frequently re-test this high volume absorption area, bringing the market back down into the reversal area (where the high volume was first seen) to make sure that all the selling has, in fact, disappeared. You will know immediately if all the serious selling has disappeared because the volume will be low as it penetrates back into the old high volume price area. You would be wise to pay attention to this observation because it represents an excellent buy signal. In summary, to mark a market down challenges the bears to come out into the open. The low volume of activity shows that there is little selling left from the bearish side of the market. There is now an imbalance between supply and demand caused by the recent shake-out (at point (a)). If there is little or no supply left in the market, this clearly shows that the trading syndicates and market-makers have been successful in their attempt to absorb selling from the weak holders, and that prices are now set to rise."
Note - this is open to interpretation. Does the phrase "the volume will be low as it penetrates back into the old high volume day" mean, One: "low relative to a couple of days previously" or, Two: "low in relative to the volume which occurred at the previous low selling point"? I've tried to show that volume has been lower and lower than previous lows in the chart above. I think that's a satisfactory interpretation of the evidence before us and of Tom Williams's intent.
Further. The reason I pointed out the similarities between action around 2011's Columbus Day and 2010's Columbus Day is because I'm an empiricist.
I don't take a catechism as gospel truth.
If x happened after y, on Columbus Day 2010, and it doesn't accord with VSA principles - then shouldn't one perhaps reconsider VSA principles - maybe just a little? hey?
The events prior to Columbus Day 2010 are similar to the current events prior to Columbus Day 2011. Yet some people here want to insist that the coming events after this year's Columbus Day will be dissimilar to Columbus Day 2011. Now - if VSA has such rigidly defined principles providing rock hard assurances about future action, what happened back around Columbus Day 2010. Clearly - "the market" got it wrong back then. :)
(20min delay)