Right and I thought 4/29 was 2.5 percent change but it looks like i wasn’t correct.
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As I have been so many times. It’s easy to get mislead by a good looking candle and ignore the relative change with only slightly loser close from the day before. Or with me, it was a black candle so I assumed it wasn’t one but had a sweet gap-up. Devil’s in the details.
Lakedog
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According to Dow Jones Data, volume increased 8% to 4.72 billion shares vs. Monday on the New York Stock Exchange. Thus, the stock market action marked the S&P 500 with its first distribution day.
Looks like 50dma is a magnet for S&P and Naz.
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Yes, SPX had a distribution day. NASDAQ failed to make it based on the old volume criteria. Here are some of my notes on Distribution Days and Stalling days:
DISTRIBUTION COUNT BUY AND SELL SIGNALS
Definition-basically it identifies heavy selling in major indexes with index closes down more than 0.2% with volume greater than prior days. The criteria outlined is:
- Market closes down by at least 0.2%
- Volume greater than or equal to prior day
- Tracked for 25 trading daysList item
The key is that it is indicative of institutional selling more aggressively.
The number of distribution days is counted and 6 distribution days within any 4-5 week period shows market at risk, uptrend will typically rollover into downtrend. Note that Distribution days fall off from the count after 25 days from last Distribution day or index moves up 6% or higher from last distribution day (close of distribution day to intraday high of fall off day).
Stalling Days are heavy volume without further upside progress, usually at or near new highs. The criteria are:
- Market at/near new highs
- Closes with small gain (0% to 0.4%)
- High volume in lower half of day’s range
Count first stall day as distribution, after that do not consider additional stall days in distribution count.
SIGNALS ASSOCIATED WITH DISTIBUTION/STALLING DAYS
B10: Distrbution Day Fall Off
Buy on the day that distribution count falls back to count of 4 from 5 or 6, and close is above the 21 sma with buy switch on.
S3: Full Distribution Minus One
Sell when count goes up to 5
S4: Full Distribution
Sell after full distribution count of 6; continue up to a total of 8 distribution days
S13: Distribution Cluster
Cluster is 4 distribution days within a rolling 8-day period.
Sell with first 4 distribution days in rolling 8 days, continue to sell with each successive distribution day up to a total of 8 days in a rolling 8-day period
Cluster Count reset once cluster count drops to 3.
Short answer is nothing to do at this moment. The start of distribution day counting is more of a warning to be aware. Personally, while I am bullish, I do not like the last couple days drop in buying at the close (see Buyandholdisdead’s post with charts above). Not alarmed, but aware. Don’t forget, one of my favorite “mis-speakers” Powell is up to bat tomorrow. He’s probably well stewed after his “disagreement” with Trump and who knows what will flow from those seasoned oratory lips tomorrow.
Lakedog
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Meant to add this to the above. From Tradervue, their perspective on distribution days:
Distribution Days Risk Levels
- 1-2 Days: Normal market behavior
- 3 Days: Caution - reduce new positions
- 4+ Days: High risk - defensive positioning
- 5-6 Days: Consider moving to cash
Nice and concise to put the count into perspective.
Lakedog
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Buy SQQQ at 3:30PM, sell at 10am, but TQQQ, sell at 3PM. Repeat 
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But, keep in mind each distribution day is different and IBD always says clustering of DDays in a short period makes them worse. If the market rises 5% from a DD, it is removed from the count, or if 25 trading days pass, it is removed from the count.
Hence the S13 Rule for clustering as noted above.
As noted above
The 6% comes from two different sources as to the IBD Market School Criteria. Could it be 5%? Sure, especially if that is from Webster recently as he so wants to “adjust” some of the criteria. But 6% or 5%, not sure it really matters. The key is the message of a transfer of stocks by the market makers (institutional selling). Which is the message of Distribution Days, don’t lose track of the message. It’s big flow of money.
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Sorry, I did not look far enough back.
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NASDAQ closed up, this is the 10th day from initial low above 21 SMA. That is a B5 Buy signal, flat or up day with low above 21 sma, 10 days from first close above. It is repeated every 5 days hence.
Note, the volume was up but the actual gain with the late day pullback was only 1.07%. Close but no cigar for an additional FTD. Only a couple more days of eligibility for additional FTD.
Lakedog
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Hi Lake, so what day are you starting from? It’s 25 days from that day correct? Also if the volume was 1.07% why isn’t that another FTD? How much volume are you thinking we need?
You only need more volume than day before, is my understanding.
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Hey Andy, it’s all in my poor phrasing. Volume only has to greater than the day before, no specific amount. The “actual gain” I’m referring to is the other major factor of price, which does have specific levels as you know. Close to close was 1.07% (on Stockcharts, I have not measured myself). Sorry for the wording that confused.
Now, actually I have not recalculated the last 200 days range but given the volatility we’ve had, am sure it still meets criteria to be >1.25% for FTD’s.
Counts get confusing. For FTD’s, Day 1 is Rally Day (April 7th), so by my count we were day 23 yesterday and day 24 today (Friday). For above the 21 sma signals, it seems to be day 1 (to get to a count of 5) is the day after the initial low above. I have several IBD marked Market School Charts and that’s how it seems to be but will recheck. Although, don’t forget, for 21 sma signals, the price action must be flat or higher on that day or the signal is delayed until it is. But the count stays the same. You could get two signals back-to-back or the same day technically. 
The complexity is part of the issue for using this system, for me. The TOS thinkscript does a good job but could use some fine tuning. What I have seen, the TraderVue program is nicer and has some nice additional features but you have to pay for it on TraderVue. I suspect I will use the system in a limited sense for comparing major signals down the road. Until then, I’ll continue to stumble through.
Lakedog
Beautiful day at the lake. Nice to have internet too. Tree crew and 10 yards topsoil due in the next hour. Back to real work.
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Ok Thank you. Webby said on a video that I watched recently that surprisingly the volatility isn’t that high right now so 1 percent would be what we need. But you are correct on the 1.25% on high volatility markets. That seems alittle unwieldy trying to figure it out.
Ok great I was confused on that so it’s the rally day not the first FTD. That makes sense.
Ok have fun. I have to cut down a pine tree today.
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From my information, this is the IBD rules for determining the percentage to determine FTDs:
“Percent increase criteria based on volatility. Volatility defined as the average percentage gain of the up days over the prior 200 days.” Then based off of these ranges for the result:
Volatility < 0.4 Close gain > 0.7%
Vol >= 0.4 < 0.55 Close gain > 0.85%
Vol 0.55-0.99 Close gain > 1.00%
Vol >= 1.0 Close gain > 1.25%
TraderVue has the same table, but uses the phrasing of range not specifying “up days” as IBD does.
I ran a spreadsheet of NASDAQ’s data and I get for the average of up days in the last 200 days as generating a volatility of 1.07%. From the table, that gives a requirement of 1.25% closing gain for a follow-through day.
Clearly splitting some hairs, or I may be miscalculating, but trying to follow the rules very specifically. Although, I also understand there is nothing specific about trading “rules” that likely merits two decimal points. Will keep following and trying to keep to the rules.
Lakedog
PS I have a tremendous amount of respect for Mike Webster, but also see the same flip-flop and “bending” of the rules when it fits his perspective as he accuses O’Neil of having done. Trading is a fluid thing and there is truly an art and a learned perspective. That is what makes Market School difficult for me, very rigid in a spandex world.
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I agree Lake, I am wondering if it would make that big a deal if I just used 1% all the time? Do you think the .25% makes a big difference? Webby was saying that he didn’t want to make rules that were to restrictive because then you left a lot out without gaining much.
Short answer: No.
Personally, and this is my take on it to date, I appreciate the Rally Day and the first FTD or so. It helps to initiate stepping back in. In the past, I have looked at movement above the 21 ema, mixed with VIX dropping etc to escalate positions. This system almost drowns you with Buy signals, then Sell signals. I’m hoping the Power Trend signals and the Distribution Days help signal topping some. Therefore, I can’t really believe one or so extra FTD signals really would make a difference overall. At this stage of the game, specific stock movements and characteristics matter more in my opinion. That’s where I want to put more emphasis on.
But this started out as a learning experience, I want to try and continue to follow. However, I’m burning out trying to measure and understand all these nuances. Have very little time to even sort through my watch or hot lists. That’s where the money is. Wondering if there is anyone who has used Market School for some years and feels the nitty gritty details really make a difference. Would seriously love to hear their position and thoughts.
Lakedog
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B8: Buy 8 signal of “Higher High”
Both NASDAQ and SPX have hit “new highs” which is relative for IBD. The criteria seems to be a high (not close) above the most recent 10-day high and since the rally day.
Lakedog
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Webby likes to see them break above the previous high label, is that what you are referring to? Also, we gapped up above 200dma and had much higher volume than yesterday, so I see that as additional FTDs.
Exposure raised to 60-80%
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