Institutional Distribution: Here’s What It Looks Like
I
don’t like what I’m seeing. The market sold off today with higher
volume coming in for the Nasdaq. (The S&P volume is borderline as I write
this.). Below is a recent chart of the S&P 500. I’ve marked of all the recent
days of high-volume selling. This type of selling represents institutional
distribution.
Â
When distribution enters the
market, things can get ugly. We’re still in upper half of the seven month
trading range. Potential support exists around 1188, which is both the swing
low of 6/27, and the 50-day moving average. If that breaks, a sharp selloff
could ensue.
Even with the difficult action
over the past few weeks, breadth has remained strong. What that means is that
if support levels do break and the market sells off, there won’t be much in the
way of low EPS/ low RS breakdowns. Downside breadth may take a while to
arrive. The short-side money will be made in broken down leaders. Review your
list of stocks that have performed well since the April lows. Look for topping
patterns. That will be a good place to find some short candidates.
Also, it would be a good idea
to start tightening stops on your long positions.
Some other thoughts:
Sine the first strong day of
distribution on 6/23, the VIX has done nothing but go sideways. Four days of
high volume selling haven’t put fear into the market. That’s unfortunate,
because it may take something like a strong break of the support levels
mentioned above before people start to get scared.
In my June 27 column I showed a
chart of the OIX vs. Crude. I pointed out several times where the OIX topped
before the price of oil. Today we saw oil rise back above $60, and the OIX sell
off. This is not a good divergence if you hold oil stocks. Be careful.
Best of luck with your trading,
Rob
P.S.
Click here for the Hanna ETF Money Flow System.
Â
Â
Â
Â