This chart is in response to a discussion I recently had with another trader. Three things are plotted here: SPY price, SPY volume with 30-day Bollinger Bands to spot days where volume breaks three standard deviations, and the VIX.
Green vertical lines represent the points where SPY volume hit three standard deviations from its 30-day average. These lines are applied to price, volume, and the VIX.
The goal is to determine whether or not volume spikes can give us any insight into the following price action. I have not completed the analysis and will be altering the study to ensure that my methodology is valid for the task at hand. I hope to hear some feedback.
Warnings: Some of the green vertical lines are in places where volume spiked but did not reach the band. This is because the volume spike was significant but the nature of standard deviation did not allow the volume to reach three standard deviations due to the preceding spike. Do not use this to make trading decisions. Incorporate it as you wish, but this is an incomplete study that should be improved and used alongside other methods if any value can be derived from it.