Over the past six months there has been distribution occurring in the market. However, the market has been able to move higher due to bottom fishing and value buying. So far the choppy market we’ve seen since the first of the year has been a result of profit taking (distribution) in stocks that had been making new highs with the money raised being put to work (accumulation) in stocks that have been beaten down enough that they were making new lows at the end of last year. When the S&P 500 index (SPX) broke higher in March the number of new highs jumped to healthy levels. Currently, SPX is within 2% of those highs, but NYSE new highs aren’t rising rapidly. This is a bit of a concern and suggests that distribution is still occurring, but nothing to worry about yet.

Another sign of the battle between the accumulators and distributors comes from Trade Followers breadth. It is holding up at healthy levels with the same condition as NYSE new highs/lows. The number of bullish stocks have been declining, but the number of bearish stocks isn’t increasing. Money is being raised from the most bullish stocks on Twitter and being used to accumulate the most bearish stocks.

While the market chops sideways to up the cumulative advance / decline line continues to march higher. This indicates that the accumulators are winning the battle, which increases the odds that the market will break higher.

Bottom line, the bulls are winning at the moment, but keep an eye on new lows and the number of bearish stocks. If they start to move higher it will be your first warning sign that the accumulators are withdrawing which will result in a declining market.