The Rogue Investor » distribution

Markets Fall, SEC Slaps Goldman with Fraud Charges

Alex — Sat, 17 Apr 2010 00:00:44 +0000

S&P 500

Friday marked the first session since February 23rd that the S&P 500 fell over 1%. This time, it did it on ultra-high volume. The Nasdaq and Dow were the only gainers this week, up 1.1% and 0.2% respectively.

The SEC handed the market a big hit as it charged Goldman Sachs (GS) with fraud. Even then, the exchanges closed off lows showing some strength.

While the bulls and bears will spin it their own way, the distribution count is up to 4 for the S&P 500 so we are at the minimum of selling days that will put the uptrend under pressure. As of now, I would hold off on adding any new long positions and keep a sharp watch on your holdings.

Earnings will continue to come out and drive the market. On Monday, we can see what direction things go. If the market closes stronger, we will know that Friday’s session wasn’t all selling and should expect higher prices. If not, expect lower.

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Dow Touches 11,000; Up on Lower Volume

Alex — Mon, 12 Apr 2010 03:22:51 +0000

The Dow Jones Industrial Average

The Dow finished up 0.64% last week. The move was made on lower volume and reached a psychological tipping point of 11,000.

Since the last correction, the Dow is up just under 11% and is probably on the extended side. Regardless, the volume is the only warning sign. Friday’s trading closed just below highs for the day and broke into higher ground.

We have several distribution days, but we are not in the correction-warning level of 4 – 7. Also, the volume level on the distribution days was greater than the day before, but not above the 50MA for volume.

For now, we are still in a confirmed up-trend. Add new positions and hold winning ones until further selling takes place.

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Rally Continues Despite Distribution

Alex — Sun, 04 Apr 2010 19:09:45 +0000

As the first week in April wraps up, the markets closed on a positive note, up 0.75% on average. All together, the S&P 500 added slightly over 1% last week but volume was down across the board of exchanges.

While the markets did add to the rally, we have begun to see the early stages of distribution (professional selling). The S&P 500 experienced 3 days of selling as compared to the 1 day of buying.

Stocks remain in a confirmed rally, but this recent distribution should be a source of concern and it would be wise to consider taking profits on your positions.

Stocks to Watch (Long on Breakout)

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Markets Up Amid Distribution, Long Picks

Alex — Mon, 29 Mar 2010 00:29:36 +0000

The S&P 500 closed this week up a modest 0.58% on lower volume. This close was in the middle of the week’s range signaling indecision in the markets.

Also, the major exchanges are at the top of the trading channel. This is a warning for bulls opening new long positions as we could see a corrected towards the bottom of the trading channel.

One great sign for the market was that both Monday and Tuesday were strong sessions, closing on the highs for the days. After such big volume last Friday, the 19th, these days signal that it couldn’t have been all selling.

Still, the markets have seen 3 distribution days recently. If the markets hit 4-7 in a 2 week span, a correction is more likely.

Stocks to Watch (Longs)

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Markets Take First Hit, Correction Possible

Alex — Sat, 20 Mar 2010 22:49:14 +0000

Above is a long-term chart of the NASDAQ. I’ve decided to focus on this exchange because it is the market leader among all indexes.

When considering the health of the market, you should take a look at both the short- and long-term charts to get a more complete view.

Currently, the NASDAQ is looking pretty healthy in the long-term. We are only a few percent off the highs from last year and have rallied an impressive 87% from the bottom in early 2009. We recently moved about a major resistance level and have a strong trend line of support to fall back on.

Below is a short-term look at the NASDAQ:

This chart shows a bit of a different story from the long-term view. The market has been trading in a widening channel as the corrections and rallies have been becoming more volatile.

There are two main things to consider from this chart. First, we are near the top of the channel and second, we saw the first major distribution day in around a month.

IBD credits some of the volume spike to “quadruple witching,” which is the quarterly expiration of futures and options. Regardless, I think this is a big hit to the market after a blazing hot rally in which down days were a rarity.

In the short-term I am bearish considering these two factors. Long-term, though, I see no signs of the rally stopping.