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Accumulation Distribution Showing Unquestionable Distribution Taking Place In S&P 500
By David Spurr on June 20, 2009 | More Posts By David Spurr | Author's Website
The accumulation/distribution indicator looks at the price changes in relation to volume. Closes in the upper end of the range move the indicator higher and closes in the lower end of the range are considered down days and move the indicator lower. The daily volume is added on up days and subtracted on down days.
Consistent high volume down days will result in the line moving lower. Conversely, high volume up days, closing near the top of the range will push the line higher. Some of my earlier posts have confirmed that something changed on the 17th of June.
In the case of the Acc/Dist - 5m chart above, a trend line was broken and the acc/dist line has been moving lower, implying distribution.
Given today’s high volume / algorithmic trading / quant trading / computer driven strategies, I theorized that these models are selling any increases in price - if there is a distribution taking place. My rationale being that price and price alone is driving the selloffs. 5 Minute or daily bars have alot of other “noise” where the one minute bars should be a transparent view of the price action.
Here’s why : I thought it would be most evident when the time increments were smaller instead of larger. A one minute chart should show the distribution more effectively than a five minute chart. In a five minute bar, you could have a major high volume selloff in the first minute, followed by sideways price action in the last four minutes. If the price bar closes in the upper half of the range, then all the volume would be added versus subtracted - hiding the selloff with respect to the indicator. I thought that by decreasing the bar size, it would be more difficult to hide the selloffs from the indicator.
I was amazed when I looked at the graphic.
I believe that we have a serious distribution taking place. Decide for yourself. Below is the 1m Accum/Distribution indicator with the SPY.
The above chart represents sixty days of 1m bars. The price action has been higher, but obviously the majority of the price action has been on the downside. In my mind this confirms that we definitely have a distribution taking place.
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Expect abrupt currency movements next week, it is likely to be an exchange of holdings from an account denominated in one currency to an account denominated in another currency and yes the volumes are fantastic.