Distribution, It's Real, It's Here

Yesterday I mentioned the possibility of a false breakout and the horrible looking price volume relationships. Today was ugly as well. A solid breakout or rally should see a majority of stocks advancing on advancing volume. Today we look at the Dow 30: 7 stocks closed up on increasing volume while 15 closed up on decreasing volume-about 2:1 which fits with the overall market-The S&P-500 had 215 bearish advances compared to 122 bullish advances.

Then there are the 3C charts and quite a few, but it's worth a look-it's a brief journey through major market events. Remember, a negative divergence is when price makes higher highs, but the orange 3C indicator with price fails to make higher highs and instead starts making lower highs and moves lower. This negative divergence indicates sellers in the market and distribution which precedes a decline. Well start with today's charts.

The above charts are all from today the S&P-500, Russell 2000, Dow 30, the NASDAQ 100 and XLF. Note 3C and TSV (white with a blue moving average in the bottom window) are all negatively divergent or you could say under distribution. "But they are making new highs?"

Lets look at some more significant events in the market and note how 3C is always calling the divergence even when TSV may miss a few, and many or most are making new highs before the fall.

The 2007 top on the SP-500-the start of the bear market.

The Russell 2000-2007 market top

The Dow 30 2007 market top.

Who remembers the monster trend in oil that lasted about 5 years or so-this is the moment the trend died and the reversal was called here within a week if the event.

The end of the dollar's 1 year rally. the dollar is now positively divergent and moving up.

The 2008 end of the Rally in Steel

A few days of new highs in the NASDAQ 100 end the tech bubble, this is the 2000 top.

The Dow crash of 1929.

Finally, the Crash of 1987-Black Monday. In this instance TSV did not pick up the distribution, but 3C gave clear warnings.

In conclusion, look at the posts below, don't get hung up in daily moves and if your indicators work, trust them.

If you'd like to try my 3C indicator you'll need Stockfinder or Telechart. TeleChart will even give you the first month for free! I'm an affiliate for them so I appreciate it if you' use my links below and tell them Trade Guild sent you. Just email me and I'll get you started. Enjoy your holidays.

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