Market’s uptrend has resumed, but the distribution days (high volume selling in major indexes) is still valid but has reduced to 5-6. A distribution day is defined as the loss of more than 0.2% by a major index — the Nasdaq, the NYSE composite or the S&P 500 — as volume ticks higher than the prior session’s total. Tracking the accumulated damage is crucial to gauging a market’s health.
There are three ways a distribution day can fall off the count. The first is by the calendar. After 25 sessions, a distribution day expires. The count falls by one. I will later explain the other two.
Delta Market sentiment indicator is still bullish, based on Last week’s readings.
||2 Weeks Ago
||3 Weeks Ago
Current Market Exposure: 100% Equities, 0% Bonds, 0% Cash
As you can see, it is dropping. But this this last Wednesday on Dec 18th after the Federal Reserve meeting, the market went up. It was high volume rally, volume increase across the board.
Now it is not good or bad for us. Because we just react to the market – we don’t predict it or hope things change. We let the market do what it wants and we just act accordingly. The market remains irrational as long as we are solvent. So in order to avoid our insolvency we don’t act in reaction to the market, with it and not against it. We bet with the market – if it’s going up we buy financial instruments the would correlate with that (like buying call options), if its going down we buy financial instruments the would correlate with that (like put options).
We are just focused on one and only one indicator and that is price – It is the true north star. We do not bother or concern about the news, federal reserve, analysts opinions etc. etc.
All we see is the price, for example the price of QQQ, and the volume associated with that – If the price of QQQ reduces in high volume for 6-8 times in last 25 trading sessions we covert into cash or buy put options.
At present – the market is back on the upswing. So we buy call options on stocks or ETFs like QQQ or just buy QQQ and wait. Its as simple as that
I will post shortly – the sectors that are also in the upswing, the industry groups that are in the upswing, and also the stocks that are making new highs.