Distribution Day

A distribution day is indicated by a major market index such as the Sensex closing down 0.2% or more on higher volume than the previous day. Distribution in the stock market refers to the increased selling of stock by large institutions. The number of distribution days on the Sensex helps us in tracking the general market condition. Our studies have shown that four to six days of distribution over a period of five weeks are often enough to turn a previously advancing market into decline. Once you notice increasing distribution, it is best to hold off on any further stock purchases, and perhaps even cut back on some of your positions, especially if you are on margin.