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Matt's Market Insights


We track distribution days as an indicator of institutional selling and use them as a tool for identifying market health. Here's a brief review of what they are and how to interpret them.


The definition of a distribution day is relatively simple - it's a day when a particular index loses more than 0.2% and the session's volume is higher than on the previous day.


The general thesis is that because institutional trading controls the bulk of daily volume, and thus overall market direction, signs of institutions exiting the market should put investors on alert for anything from a mild decline to a major bear market.


Distribution days increase as described above, and decrease over time as days "fall off" the count. There are three generally accepted ways that distribution days are removed from the count.


First, after 25 sessions, distribution days are said to have "expired" and are removed from the count. After the ... Log in or subscribe to continue reading.

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