The Volume Oscillator identifies whether the volume trend is increasing or decreasing by using the difference between a longer and a shorter moving average of volume.
When the Volume Oscillator rises above zero the shorter-term volume moving average has risen above the longer-term volume moving average. This means that the short-term volume trend is higher than the longer-term volume trend. Rising prices along with increased volume, and falling prices along with decreased volume are interpreted to be bullish signals. Conversely, volume increasing as prices fall, or volume decreases as prices rise, is interpreted as a bearish signal.
Chart courtesy of Prophet Financial Systems (www.prophet.net)