We receive many questions about how the technicals seem to determine market direction ahead of time.  One of the best I have found is a simple exercise of comparing volume levels and price action.  A crude but simple test exists when comparing raw volume and price action at days end.  An accumulation day is one where prices advance on higher volume than the prior day. 

A distribution day is one where prices fall on higher turnover.  It's not rocket science and really a first level examination, but it leads to deeper analysis and potentially stock picking, hedging or trading a trend.

A market under distribution is one where institutions are selling stock indiscriminately.  You want to do the best to get out of the way!

Now, just one day does not make a trend.  However, a series of these days establishes a trend or pattern that can show continuation.  The investor's business daily, or IBD keeps track of distribution days, known as the count.  They will monitor how many distribution days occur on the indices, and if these become numerous, coincident with poor price action they will consider the market in distribution. 

Is this a bad thing?  Not always, in fact a market in distribution may only be a sign of a modest correction. Since the financial crisis, these have been great moments to lighten up heavy positions. 

It could also be a sign of worse things to come, perhaps a bear market.  Back in March 2000, my friend Chris Gessel at IBD wrote up a warning for investors to 'start raising cash' when the number of distribution days started to rise.  This was sage advice, as a nasty 18 month bear market ensued.