When it comes to technical analysis, the first question you have to ask yourself is what parameters describe a price trend. The answer is quite simple: a price trend is described by change in price during specific timeframe, volume traded during this price change and volatility of movement during this time-frame. Then the logical conclusion would be to use the technical analysis of price, volume and volatility. Volume analysis is very important element of market timing strategy and its importance should ne be underestimated. Volume provides many clues as to the intensity of a price move.
Volume based technical indicators may help in determination of the health of an existing trend. As a rule a healthy up-trend has higher volume during up-move, and lower volume during a correction down. Controversially, a healthy downtrend usually has higher volume during decline of the price and lower volume during bounce up (correction up).
By analyzing intraday volume a trader may see where a stock is being repeatedly bought as it dips.
Another point worth mentioning is that as a rule at the end of the rally (especially down) you may see strong volume spike (surge) which usually marks the end of this rally. And if you do not have a reversal after that, you at least may expect short term correction (depending how strong volume surge was witnessed). This point very often used in Elliot wave theory as a confirmation of the end of a wave.
Next, well known fact is that in most cases, at the begging of a strong long-term up-trend, you may see high volume which reveals that many institutional traders pumping money into the stock market by buying cheap underpriced stocks.
There are many other points that are covered by volume analysis. Such as tracking flow of the money, measuring accumulation and distribution, defining oversold and overbought conditions and etc.
When it comes to the volume based technical indicators a moving average of volume is the simplest one which should also be taken into consideration in developing your Market Timing system. A Moving Average allows to smooth single spikes and it is an indicator that shows the average volume over a period of time. The same as with MACD you may compare fast and slow MA applied to volume. This is important as when the current volume (fast VMA) rises above a long term volume MA, this is potentially could be a signal that there is increased market activity which most likely will affect the price trend.
At the end, unlike many price based indicators, volume could be considered as a measurement of traders sentiment, of human nature.
We hope you're beginning to see why volume is considered as a trader's best friend.