 The Stock-Compass.com Trading System
It is much more profitable to trade with the prevailing trend than counter to the trend. Getting into trades earlier in the trend leads to higher profits. This is accomplished by detecting signs of weakness or strength Weakness is only seen in up bars and strength in down bars. This is because professional syndicates control the markets – not individual investors and traders. Their massive financial strength necessitates different trading techniques than individuals use. When individuals sell a small number of shares of stock (e.g., 100 shares) the shares can be sold anytime and they will all be sold at the current price. But if a sale of 100's of thousands of shares is initiated on a day where there is not a strong upward move, shares sold later would get a lower price than shares sold earlier - because the large volume sold pushes the market down. This works in reverse when the professionals want to accumulate shares. Without bad news forcing down the price they would pay a higher and higher price as they bought increasing percentages of their batch. "Professional distribution" refers to extremely high-volume up bars (suggesting market weakness). "Professional accumulation" referes to extremely high-volume down bars (suggesting market strengtth The U.S. Dollar increased from 1996 through July 2001 and then crashed through March April 2008:  At the top of the market (inside the square above) distinctive signs of weakness warned us of the impending trend change (explanation follows the graph):
The longer a market trends higher more professional distribution days are required to effect a trend change. Of course, longer downward trends require more professional accumulation days. The three blue lines above mark very high volume up bars. Many think that high volume up bars suggest strength, but it's a matter of degree. Mildly above-average-volume up bars are bullish but up bars having enormous volume suggests weakness.
The stock market was strongly bullish for most of the 1990's:
When the bull market in stocks finally ended in 2000 it had been in effect since October 1990. The chart of the S&P 500 below shows the market top in 2000. It took four professional distribution days between March and November 2000 before stocks started going down in earnest.
Stocks were in a bear market from October 2000 through October 2002:
In October 2002 the bear market in stocks ended. Here's the chart of the S&P 500 during that period. Look at the two professional accumulation days (the blue vertical lines).
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