reading volume and open interest

Generally speaking decreasing volume on an up day (NO DEMAND) is Bearish Volume.

If the volume is low and the price moves up (in nearly all cases) this has to be a false picture. The low volume is caused by the professional money refusing to participate in the up move, usually because the market is weak. The price is moving up, but it does not have the support of those traders that matter. This is a feature of a bear market – UP MOVES ON LOW VOLUME.

The reason for the non-participation of traders is because they have seen weakness in the background action. THEY KNOW THE MARKET IS WEAK.

If this price / volume action is seen with a trading range to the left it is a very strong sell signal. In most cases the mark up is quite deliberate.

It usually starts with a wide spread up but not too early so as NOT to cut you out of the market. This is often a deception to draw in as many ‘retail’ buyers as possible. Buyers are then ‘locked in’ by the inevitable sharp down move.

EXCEPTION TO THE LOW VOLUME RULE

If there is a low volume (UP DAY) on the very first day of a break-out from a genuine accumulation area, the result is often a rapid one day UP MOVE on low volume.

This is NOT a sign of weakness. The wide spread up and out, on the first day from a genuine accumulation area, on low volume is caused by SHORTAGE OF STOCK.

I agree with this from incrediblecharts.com:

Accumulation and Distribution:

Accumulation and distribution indicate who is in control of the market and often signal a reversal.

Trading ranges represent longer term accumulation or distribution.

Accumulation is when the market is controlled by buyers.

A down-trend that stalls while volume remains high signals that accumulation is taking place.
Sellers have lost control to buyers and a reversal is likely.

An Accumulation Day occurs when either:

Volume increases (compared to yesterday) and closing price moves higher
OR
After trending downwards, there is little or no price movement and an increase in volume.

Distribution is when the market is controlled by sellers.

An up-trend that stalls while volume remains high is a sign that distribution is taking place. Buyers have lost control to sellers and a reversal is likely.

A Distribution Day occurs when either:

Volume increases (compared to yesterday) and closing price moves lower, or After trending upwards, there is little or no price movement and an increase in volume.

Open Interest:

I have never really done much work on interpreting Open Interest but I plan on adding it to my Long Term structural analysis using Commitment of Traders. From Floyd Upperman Commitment of Traders book:

openinterest

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