In this week’s webinar the MarketSmith team went over distribution days and how keeping track of distribution helps us gauge the trend of the general market. Since three out of four stocks follow the direction of the general market, overall market direction is one of the most important factors to consider in portfolio management.

In “How to Make Money in Stocks” William O’Neil explains:

“You can be right on everyone of the factors in the last six chapters, but if you’re wrong about the direction of the general market, and that direction is down, three out of four stocks will plummet along with the market averages, and you will lose money big time, as many people did in 2000 and again in 2008.”

To better understand the market trend, we analyze the indices and look for days of accumulation vs. days of distribution over a trailing five-week period. Keeping count of distribution could warn us of a weakening market. Initiating new long positions with an increased number of distribution days should be avoided.  

To learn more about the importance of distribution days, you can watch this week’s webinar “Importance of Distribution Days” by clicking here.

 

Best Returns,

 

The MarketSmith Team