This is What Distribution on the SP500 Looks Like

By: readtheticker | Fri, Jul 15, 2011
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Reading the Ticker

Large accounts need to reduce positions in risky assets if they feel prices are about to role over, these accounts require prices to stay up or hold a trading range so they can sell into it. In short they are willing to pump up prices in the short term to latter sell into it, this is the Wyckoff distribution phase.

You guessed it the public is not a great benefactor of distribution phase. They are the pansy required to buy stock at this time.

Distribution is defined as:

Source: Wyckoff Terms

Distribution area is where the Supply overcomes Demand and stops the upward move and eventually begins the downward move. Distribution refers to the elimination of a long investment or speculative position and often involves establishing a speculative short position by professional interests in anticipation of a decline of price. In the distribution area the professional investors or speculators who had previously had bought stock, sell there stock to the public. The public buys and it generally buys because of good news of various sorts. Good news on the company, its product, the economy or any news which will entice untrained people to rationalize there buying decision. The best news of all is the advancing of the price of a stock. Often the reason that untrained people buy is that they do not want to miss out on the anticipated profits they think there are going to get as the stock continues to move up. Or they may buy because the stock has reacted a few points from the top and they think they are getting a bargain. After having sold there long stock professionals have no reason to support the stock on reactions and so they cancel there bits under the market, they may not only cancel the bids but they may establish short positions in anticipation of a large decline in price. Distribution is usually accomplished in a relatively SHORT TIME, Whereas accumulation takes MUCH LONGER, sometimes over many years. MAJOR distribution occurs in only a few weeks or perhaps a few months very rarely over a several year period. Distribution is usually characterized by wide price movements and heavy volume and GREAT activity.

The chart below shows that volume has been larger on sell offs than rally's. If the Wyckoff composite man expected higher prices in the immediate future then why would he be selling stocks now. At the moment the professionals wish the market to hold a range to sell into, so far this is being provided and the professional fund managers are very happy that this remains so. (see video below)

S&P500 Distribution

Yahoo Techticker 20110714




Author: readtheticker


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