Volatility is interesting as it is one of the best indicators of an impending market bottom but like so many other indicators is limited in helping to find a market top. I do however think it can help. At previous market tops we have seen a rise in volatility even as the market made new highs.
Right now volatility remains low though off its most recent lows. I would expect an increase in volatility while market breadth continues to weaken even as the market makes new highs going forward into 2011.
What happens now?
Here is the big picture as far as I am concerned in that volume will expand into the next major top as explained and expected by past market action: