On Accumulation and Distribution Patterns

 |  Includes: PGB, QQQ, SDOW, SPY, UDOW
by: Marvin Clark
Even the talking heads on CNBC were bewildered by Wednesday’s magnificently generous 274.66 or 2.82% upswing, pushing the Dow over 10,000 at the close to 10, 018.28. The S&P 500 Index advanced 32.21 or 3.13%, to 1060.27; likewise, NASDAQ advanced 65.59 or 3.13%, to 2159.47.
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Every bias or perspective is based on one’s experience. I started investing in the previous generation. At the beginning of the 1980’s secular bull market some of the bigger names for market timers, technicians and traders were Marty Zweig, Joe Granville, Sherman McClellan, Frankie Joe, Ralph Acampora, Stan Weinstein, Gene Morgan, Norman Fosback, Robert Prechter, Martin J. Pring, Larry Williams, and to be sure others. There was also Richard Ney and The Ney Report.
Among Ney’s assorted market thesis for trading, he focused on the NYSE specialists and their intraday trading behavior. Ney documented the previous day’s imminent counter trends thru pricing action; his meme was prices changed on low volume and that volume was created by large market moves.
Thusly, traders could detect and anticipate rallies and selloffs by price change. In a nutshell, stock prices were dropped (for accumulation or short covering) by specialists before prices moved higher. Conversely, strong markets or inexplicable up movements (affording distribution or shorting) preceded selloffs. Learnt trading skills by men in a bygone era are merely quant in a world of high frequency and algorithm computerized trading.
Although, imperfections continue lurking in the shadows of this brave new world, such as the 200 shares of Anadarko Petroleum (NYSE:APC) that traded on Tuesday for $100,000, triggering a circuit breaker and halting trading for five minutes. We must adapt because returning to the past is not an option. Still, crowd psychology and human emotion cannot be entirely unplugged from the market. Nor, should it be.
The current rally is being described as the real thing. Earnings season is near. Has the market bottomed and the correction is over? Or, is this a reflexive short-covering rally? Will breath and volume expand? Can this market climb a wall of worry? Will retail customers continue to boycott stocks? Can the market break out of its 2010 trading range? Only time will tell.
Nothing fundamentally has changed for investors. Better earnings numbers’ must be reported and the economy must substantially improve before the dwindling days of summer in September, otherwise, this market will simply replay the second quarter. And, like the second quarter, nimble traders with nerves of steel shall have an opportunity to do well, while, investors will find another quarter lacking in gains for their long-term portfolios and daily thoughts full of anxiety.

Disclosure: None