There may be other reasons for your symptoms, but my XC70 had a similar issue last month. The difference was that sometimes any combination of brake, check engine, ABS lights would come on and sometimes the odometer and speedometer would quit working for a few minutes. That being said, sometimes I had the exact thing you describe. It was the ABS control unit.

If you can, go to an AutoZone. They will read the fault codes for free so you can ask the more knowledgeable people on this site for assistance. There were all sorts of codes that sprouted from our problem as this computer deals with so many systems (speed sensor, ABS, etc. etc)

Look up threads dealing with this extremely common problem across Volvo's product line...you don't have to spend the 800-1000 dollars a dealer will likely demand. I got a quote of 450 for parts and labor from a dependable non-dealer, and you will find several references on Brickboard for someone in California that will rebuild yours (and actually reinforce it) by mail for even less.

You might find that although the flashing arrow stays on, after a few restarts, the transmission might work just fine (not stuck in limp home in spite of the arrow flashing). Good luck.