How Does Monday’s Low Volume Affect The Bounce Chances?

NYSE volume came in at the lowest level in over 2 weeks as the market rallied on Monday. Conventional wisdom suggests this low volume is a bad sign and it hurts the chances for a further bounce/rally. I’ve seen many comments in the last 24 hours stating the bounce cannot be trusted because of the low volume. So below is one test I ran examining this theory.

I compared these stats to days when volume was not at a 10-day low and they are quite a bit better here. From this standpoint it doesn’t seem the low volume is any kind of a warning sign. In fact it appears this setup provides a bullish edge. Perhaps very weak volume leaves just enough doubters that they end up chasing the market higher over the next several days as they become more convinced.