The End Is Near: Market Tops & Distribution Days
Updated Title | The End Is Near: Market Tops & Distribution Days
Part 1: Introduction
Hello apes, I was having a look at stonks today and wondered when the hell this thing was gonna moon. (No dates!) Yes, I know, no dates. BUT, moon soon is not a date. It is a state of mind. The "moon soon" state of mind is what this post is all about.
What do we know?
Well, we know already from a shit load of DD and Bloomberg Terminal drops that the beta of $GME is sitting at as of 8 4 days ago, -0.829 -36.433.
Edit 1: Comment from u/AreYouSiriusBGone
Just on a side note, the beta you have (-0.829) is the average value from a time period of 2 years.
The most recent beta i saw on a BBT screenshot was calculated over the time period of 12/31/2020 to 04/23/2021.
Raw beta: -36.433
Adjusted beta: -23.955
Negative beta has been covered numerous times, but here is a quick rundown for the new apes.
Negative beta: A beta less than 0, which would indicate an inverse relation to the market, is possible but highly unlikely. Some investors argue that gold and gold stocks should have negative betas because they tend to do better when the stock market declines.
Part 2: Distribution Days
Now, I have not seen any post referencing these yet. However, I may be wrong! Due to a lack of posts around this phenomenon, I will let Investopedia and Investors Business Daily explain it to you.
Distribution Stock and Distribution Days
Distribution days is a term related to distribution stock in the sense that heavy institutional selling of shares is taking place. A distribution day, technically speaking, occurs when major market indexes fall 0.2% or more on volume that is higher than the previous trading day. A string of these days together is called distribution days and is often associated with signs of a market top. Distribution stock may be part of this period of high volume selling in the market, although a seller of a large position may not be able to completely unload its desired amount of shares.
Stock Market Tops: The Definition Of Professional Selling
A distribution day is a significant decline in a major stock index in higher volume than was seen in the previous session. IBD defines a "significant decline" as a drop of more than 0.2%, with no rounding up to get to 0.2% allowed.
A distribution day indicates unusually heavy selling by institutional investors, the heavyweights who largely set a market's direction.
Four or five distribution days over several weeks nearly always signal that stocks have topped and are heading for a downturn. That's similar to how persistent headaches, coughs and sneezes suggest that you ought to call in sick and break out the chicken soup.
IBD's research has determined that investors shouldn't count distribution days after 25 trading days have passed. At that point, those days of liquidation have become irrelevant.
A distribution day also falls out of an index's count after the index climbs 5% above that distribution day's close. IBD has developed this rule on the premise that when an index rallies and extends itself from a distribution day, it's showing the strength to overcome high-volume selling.
Investors Business Daily Definition
TA;DR: Institutions are offloading their stocks, causing higher volume on down days, signalling a market top
Part 2.1: Examples
Edit 2: Added examples for you apes!
By May 4, 2010, distribution days had piled up, with four such days for the Nasdaq in the preceding few weeks.
Those four distribution days for the Nasdaq were on May 4 (1), April 27 (2), April 16 (3) and April 7 (4). On each of those days, the tech-heavy index fell more than 0.2% in faster trade than in the prior session.
The other three major indexes — the Dow, the NYSE and the S&P 500 — all had more than four distribution days by May 4, adding to the bearish mood.
When the Nifty 50 started in a Confirmed Uptrend from July 10 onwards, it experienced its first distribution day on July 18 (D1) and the second on August 10 (D2).
The third, fourth, and fifth distribution days occurred on August 29 (D3), September 4 (D4), and September 11 (D5), respectively. D1 had already expired by then, putting the total distribution day count at 4. But the market started showing weakness with the fifth distribution day count (D6) on September 18.
Part 3: Some screenshots
So, a little recap:
- We know what the negative beta definition is
- We know what the negative beta for Gamestop is
- We now know what a distribution day is and what it means
I am now going to provide EVIDENCE that we have seen distribution days on the NASDAQ. Each distribution day is going to be in BOLD.
12 April 2021, Volume 767k, Change +0.10%
13 April 2021, Volume 783k, Change, +1.09%
14 April 2021, Volume 1,003k, Change -1.06%
15 April 2021, Volume 795k, Change +1.24%
16 April 2021, Volume 762k, Change +0.19%
19 April 2021, Volume 1,036k, Change -0.93%
20 April 2021, Volume 1,069k, Change -1.13%
21 April 2021, Volume 840k, Change +1.14%
22 April 2021, Volume 1,184k, Change -0.93%
23 April 2021, Volume 785k, Change +1.04%
26 April 2021, Volume 723k, Change +0.83%
27 April 2021, Volume 776k, Change -0.50%
Total Distribution Days: 5
Okay, cool, well, that is just the NASDAQ. I am sure it is a one-off! Let's check the S&P500, see what we find...
12 April 2021, Volume 169k, Change +0.22%
13 April 2021, Volume 159k, Change, +0.28%
14 April 2021, Volume 199k, Change -0.28%
15 April 2021, Volume 160k, Change +0.96%
16 April 2021, Volume 161k, Change +0.23%
19 April 2021, Volume 180k, Change -0.37%
20 April 2021, Volume 195k, Change -0.87%
21 April 2021, Volume 140k, Change +0.89%
22 April 2021, Volume 210k, Change -0.65%
23 April 2021, Volume 110k, Change +0.87%
26 April 2021, Volume 121k, Change +0.37%
27 April 2021, Volume 134k, Change -0.03%
Total Distribution Days: 4
Shiiiiit! Well, at least the institutions won't be selling stocks on the Dow Jones, right?!
12 April 2021, Volume 180k, Change -0.10%
13 April 2021, Volume 197k, Change, -0.20%
14 April 2021, Volume 244k, Change +0.28%
15 April 2021, Volume 193k, Change +0.80%
16 April 2021, Volume 171k, Change +0.34%
19 April 2021, Volume 214k, Change -0.17%
20 April 2021, Volume 248k, Change -0.91%
21 April 2021, Volume 170k, Change +0.89%
22 April 2021, Volume 273k, Change -0.79%
23 April 2021, Volume 164k, Change +0.57%
26 April 2021, Volume 127k, Change -0.06%
27 April 2021, Volume 139k, Change -0.23%
Total Distribution Days: 4
WRONG! All 3 major indexes show signs that the end is near, and this mega bull run is almost over.
Part 4: The Moon
When all of these parts are put together, we will inevitably be mooning soon. This is only one piece of evidence that the market is looking like it is about to crash. However, it is coming out from every angle.
Even the Blackrock CEO thinks the markets look frothy!
So what now?
Personally, I will be doing the only thing I know how BUY and HODL. Sell buttons do not work on my broker.
Obligatory: 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀
Posted Apr 28, 2021, 3:49 PM UTC · edited